Bitcoin hodling or trading: Which is the better investment approach?
Jan 20, 2023
The main difference between investing and trading is that investing is a long-term investment approach, while trading is usually a short-term investment approach.
Investor:s generally conduct extensive research on the assets they wish to invest in and hold them for several months to years with the goal of increasing the value of their portfolio over time.
In contrast, traders:in seek to make short-term gains by buying low and selling high, repeating this over and over to increase the value of their trading capital over time.
Trading Bitcoin works in the same way as trading stocks or foreign exchange. Traders:inside trade the digital currency either with a Bitcoin broker or on a crypto exchange.
While investors tend to look at the fundamentals of an asset as well as macroeconomic factors, traders:inside pay more attention to short-term market trends and technical data.
This is why technical analysis is so popular among Bitcoin traders. However, it is very time-consuming and as a result, traders spend hours in front of their screens. This is very disadvantageous if you don't want to make bitcoin trading your main profession.
Therefore, Bitcoin investors tend to use the so-called "buy and hold" investment strategy, which is called HODLing among Bitcoiners. In this case, one buys Bitcoin and holds the digital currency for several years with the goal of selling (or using) it once the price has increased significantly from its current level.
So far, we know that Bitcoin investors with a longer time horizon are more interested in HODLing. But before we look at the reason why HODLing is so popular, let's understand what this term even means.
The term first appeared in 2013 in a post on the Bitcoin Forum. At the time, the price was very volatile and there were several voices in the Bitcoin camp that wanted to sell. However, one member of the Bitcoin community saw Bitcoin as the future and wrote, "I'M HODLING!" One is not sure if it was a typo or if the author intentionally wrote HODL.
His main argument was that he was a bad trader and therefore preferred to ride out the volatility. Since many people agreed with his opinion, the word quickly became synonymous with long-term Bitcoin investors.
The idea is simple, you buy Bitcoin at a good price and sell it "never again". You bet on the fact that the price will always go up, so to speak.
Although this idea has become a popular mantra in the Bitcoin community, most Bitcoin investor:s take profits during a market rally, especially if they bought at a good price level and want to make larger purchases.
As Bitcoin enjoyed an impressive upward price trend over the last 13 years, the HODL strategy gained enormous popularity among Bitcoiners.
Since Bitcoin's inception, those who have bought Bitcoin and held onto their coins for as long as possible have made the highest profits. As Bitcoin's limited supply and disinflationary monetary policy creates upward pressure on the price as adoption continues to grow, it probably makes sense to maintain this approach, as the price could reach unprecedented highs in the future.
Moreover, as a HODLer, you don't have to waste several hours on complex market analysis or spend days looking at price charts, but can focus on the basics of Bitcoin and buy without worries.
You can even go one step further and use the principle of the Cost-Average-Effect HODL your Bitcoin. This way you have a recurring investment plan where you regularly add to your existing Bitcoin assets, no matter where the price of Bitcoin is trading.
Bitcoiners:inside, who want to use the cost-average effect, usually set up a Bitcoin savings plan to automatically invest in Bitcoin on a regular basis.
Bitcoin trading is an exciting alternative to HODLing. Once you get over the hurdle of analysis and basic knowledge, you can make profits within a short time.
However, this is rarely the case, especially for beginners!
New investors who start actively trading Bitcoin usually lose money. Why?
Because active trading, whether in the stock, forex, or bitcoin market, is extremely difficult, because it is not easy to predict how prices will develop in the coming hours or days.
Also, as a trader, you are dealing with professional investors who control the market with billions in capital. Not only do you not have this power, but you also have no insight into what these market participants are up to. This means that you are at a disadvantage because you have access to less trading data than institutional investors and professional trading desks who dominate the market.
If you are a HODLer:in it doesn't matter. But if you are actively trading and setting up short term trades, you can lose money very quickly if a:e big investor:in comes and buys or sells a lot of bitcoin and you are on the other end of that trade.
Which investment approach you choose is, of course, entirely up to you. At Coinfinity, we believe that Bitcoin is an excellent investment opportunity for savers.
Therefore, we generally recommend buying and HODLing Bitcoin on a regular basis as opposed to actively trading the cryptocurrency.
By avoiding trading the digital currency, short-term market fluctuations are less of a problem as you extend your investment horizon from days to many years, and only sell when Bitcoin has reached a price level where you are happy to resell part of your Bitcoin portfolio.
Sign up for a Coinfinity account and start investing in Bitcoin today.
Absolutely! The practical thing about Bitcoin HODLing is that you don't have to commit to a minimum amount. You can start small and increase.
You can even expand your bitcoin HODL strategy by buying small amounts weekly and HODLing them long.
Yes, there is! Coinfinity allows investors to invest in Bitcoin automatically by setting up a Bitcoin savings plan.
You can start saving in Bitcoin from as little as €21 by setting up a standing order to automatically buy Bitcoin on a daily, weekly or monthly basis.
Setting up a Coinfinity Bitcoin savings plan is free of charge. There are only 1.5% service fees plus the usual mining fees.
Yes. Coinfinity users can buy and sell bitcoin online and in the app. Buy and sell Bitcoin.
Investors:inside who sell Bitcoin on the Coinfinity Bitcoin portal receive the Euro amount via bank transfer to their bank account.
