HODL – Worse Use Case ?

HODL is a term that got popular through a forum post where a person claimed to hold the bitcoins forever once the markets crashed. HODL stands for Hold On for dear Life on in simple word never selling them. Now either it was intentional or unintentional, HODL did become famous in the cryptocurrency industry. 

 King Leonidas from 300

Out of the total 17M bitcoins in existence, 9M haven’t moved in the last 12 months. This represents around 53% of the total bitcoins but I am confident that this number is close to 75% in actual. It’s not possible to get the data on individual users who store their bitcoins on the exchanges

Source : Bitinfo Charts

While HODLing does promote the message of hope & avoid capitulation in bear markets, it isn’t right for the network bitcoin. Bitcoin network runs due to support from miners who mines bitcoins in hope of getting bitcoins in return.

If the blocks are solved exactly 10 minutes apart, all the bitcoins will be mined by 2140 which is 122 years from now. Margin of difference actually would be +/- 10 years.

I suspect if we go that far but for a moment let’s consider we did. In that case, there are no more bitcoins to be mined so miners make money by validating transactions. Now imagine every one is HODLing and there are no transactions happening at all. There isn’t any incentive for miners to exist because the economic incentive has collapsed. 

Bitcoin network strength depends on the hashpower supporting network and with the departure of miner, there isn’t any network or just a weak network. HODLing is celebrated & cheered upon in the industry, however it’s a threat to the fundamentals of cryptocurrency.  

If you consider bitcoin a instrument for Storage of Value then HODLers are the #1 or Most Valuable Users ( MVP) for bitcoins. 

While HODL certainly make sense to avoid the panic attacks in tough markets, it doesn’t make sense over life time of any other asset that doesn’t generate dividend. Real estate being the #1 fav HOLDing asset. 

So while times are time, don’t panic & when times are great, it’s always good to take off some profits off the table. Capitulate & HODL both are bad from economical point of view 

What’s your strategy when the times are great or when they aren’t that great !

2018-12-14T14:26:09+00:00December 15th, 2018|