Here’s the HODLing vs short-term trading comparison. Would you prefer to hodl cryptocurrency over short-term trade? A survey conducted by Bakkt U.S Customer Crypto shows that more US investors prefer hodling cryptocurrency to short-term trading.
The survey sampled more than 2000 participants within the age range of 18 to 60. the result of the survey shows that 58% are more likely to hodl cryptocurrencies for long-term gain.
Now, let’s get started with the Hodling Vs Short-term Trading comparison.
What Is Hodling?
Hodl is a misspelled form of hold, a term that describes an investor’s decision to acquire bitcoin or altcoins at a low price (buying the dip) and keep over a long time frame with the hope of making an astronomical profit by reason of exponential price growth.
Hodl is a very profitable investment strategy that has created a new crop of millionaires since the break of the cryptocurrency era.
For example, investors who bought and hodl 10,000 bitcoin at a value of $1 in 2011 will be worth over $450 million presently, thanks to Bitcoin’s deflationary tendencies, which has made hodl a profitable venture that could see hodlers making huge profits from their crypto assets.
The Dangers Of Hodling
“There is no way of making profit if you can’t take profit.” new investors are often time drawn in by the excitement of peak bull runs. This is a hard way up since the market might have peaked out, with an immediate reversal that will lead to a downward trend.
At this point, new investors can be tempted to sell low as they watch their wealth drop by 25%, and in the worst-case scenario, by 90%.
New investors who got in at a low point would likely watch with excitement as their assets increases in value, and they may likely miss out on profit-taking as the market approaches the next correction phase or bearish season due to inexperience and probable conditioning of the mind to ‘just hodl.’
This can make such investors ‘true hodlers’ hold until their investment turns zero or hold through a complete bearish market cycle. Therefore, turning hodling into a profitable investment strategy requires an investor to understand when to buy in and when to take profit.
HODLing the right way
To enter the market, an investor should monitor the market and only open a position when the market is in a downtrend or a bearish season (buying the dip).
This move helps the investor to avoid entering the market in the excitement of a bull run. When prices are high, taking part of the profit (25 – 50%) to plow it back in later can be a profitable move for a trader, but this will require an investor to exercise control over emotions.
However, both hodlers and traders should learn how to conduct technical analyses to help them detect buying and selling opportunities in the market.
What Is Short-term Trading?
Bitcoin price volatility makes short-term trading a profitable venture as traders can take advantage of short-term price gains or losses.
The bitcoin market can make a sharp 10% jump within 5 minutes of buying in, a reversible 10% drop minutes after selling, thus presenting multiple opportunities to experiencing massive gains or losses.
Based on price volatility, an experienced trader can make more profits surpassing a hodler within a short time frame.
The Dangers Of Trading
A trader stands a higher chance of losing money without proper monitoring and understanding of the market and the technicalities associated with trading.
The cryptocurrency market is highly volatile and risky. Good trading can see a trader taking profit and avoiding a serious fall. On unfortunate days, a trader can miss out on a profitable coin without buying in as the price rallies up.
An inexperienced trader who fails to use ‘take profit’ and ‘stop loss’ mechanisms will regrettably experience a zeroing of their capital. However, an active trader will manage to make a tidy profit and avoid major downtrends bound to set in after a maxing out of uptrends.
Still, a trader can miss out on a strong bullish trend which can lead to massive profit-making due to a trading philosophy that encourages selling high rather than hodling. This makes hodling a safer and preferable investment strategy compared with short-term term trading.
Trading The Right Way
Outperforming a hodler will require that a trader have control over his emotion and also be patient. Stop losses, taking profit, and averaging out can help a trader avoid the pitfalls of hodling and make consistent profits. At the same time, such a move can see a trader missing out on bull runs.
Generally, as a trader, you should stay away from frequent trading if the market is in a strong uptrend and revert to trading when the market is entering a bearing downtrend.
Conclusion: HODLing Vs Short-term Trading – Which Is Preferable?
Hodling is easier, but inexperienced investors may likely not know when to take profit as they watch their assets grow through the bull cycle and margin out as the market enters a strong bearish season.
On the other hand, trading is more technical as traders will have to watch out for pitfalls that can make traders lose more than 50% of their capital. In the long run, acquiring trading experience can prepare a trader to make a profit by buying and selling at the opportune time.
Overall, adopting the hodl strategy when the market is in a bullish season and selling as indicators point to the start of a bearish season might be the best policy to adopt as a beginner trader or investor. That might be much of a risky move to make for a larger percentage of the investors who are inexperienced. This fact has considerably influenced the survey result by Bakkt as more investors are willing to play it safe by hodling crypto assets.
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