Blockchain has been very important for improving digital security. It has been used in many different industries, but is still particularly important in the industry that it was developed for for – cryptocurrency trading.
Unfortunately, not all cryptocurrency platforms or exchanges use the same blockchain. You need to make sure that the providers that you use have the best blockchain solutions to ensure the highest level of security.
There are many ways to get rich by trading crypto, and there are many different approaches to cryptocurrency investing. One of the most common investment strategies is to do something called HODL. What is HODL, you might be asking — well, this article will talk you through what HODL is and where is best to do it. You will also get a better understanding of what role blockchain can play in the security of crypto.
What Is HODL?
In short, HODL is just a slang term used by crypto enthusiasts to describe an investment strategy. The strategy is simple. A person buys a cryptocurrency and then they hold on to it, hoping that the currency value will appreciate greatly over time. An investor that uses this strategy is known within crypto circles as a HODLER.
Several cryptocurrencies have grown exponentially over time, and it has been profitable for HODLERs to HODL their currency if they invested wisely to begin with. The likes of Bitcoin, Ethereum, and Ripple have all performed very well over long time frames, and there are many more like them. It is easier to use them if you have a provider with the most secure blockchain algorithms, because you know that the chance of a security breach is lower. This means that you have a lower chance of losing your funds and can benefit from greater stability due to the more reliable blockchain technology.
Are There Risks Involved With HODL?
The answer is yes, absolutely. It is estimated that 80% of all crypto tokens on the market currently are outright scams, which means anyone that is employing a HODL technique with these tokens is likely to be sorely disappointed.
There are also non-scam cryptocurrencies that aren’t really appreciating in value, and no amount of time seems to be remedying this. For example, if you had used HODL on Litecoin (which is a perfectly legitimate crypto), you might find yourself in a tricky situation as the value of Litecoin is nowhere near the high values it once enjoyed. It might be several years before you break even on those high values or worse, you might never do so.
Lastly, some cryptocurrencies just lose all momentum, crash and become valueless. This could be because the developers have grown tired of the project, new and better projects have emerged, or the community using that token has moved elsewhere. This is much more common than you might think. It is only because a small handful of currencies in the public eye do well that these instances get overlooked.
HODLERs tend to be extremely optimistic though and most of the time, these arguments about risk fall on deaf ears. If you’re getting into using HODL with your crypto, make sure you know the risks going in.
Best Exchanges to HODL
When it comes to picking the ideal crypto exchange to HODL, it might be different from the one that you actively trade on. A HODLER isn’t concerned with generous sell prices and is instead looking for the best buy price and lowest fees. Alongside that, they will be looking to use the safest cryptocurrency exchange to buy their chosen coin.
HODLERs will also have other criteria for selecting an exchange. The full list is here:
- The safest cryptocurrency exchange
- Low fee exchanges
- Attractive buy prices
- Large sums supported
- Non-regulated.
Why Non-Regulated?
HODLERs will typically want to buy up a large amount of cryptocurrency. However, they won’t likely want to go through the hassle of providing endless proofs of identity and personal information to do so. This means HODLERs often seek out exchanges that support large purchases without too much in the way of identity requirements.
This isn’t a shady practice necessarily; it is more to make the transaction quick and get the funds stored safely away to HODL. It is especially important if a trade is time-sensitive and a coin has a lull or dip in price that a HOLDER wants to take advantage of. The delay of providing identification could be the difference between having to HODL for months more to make the same profit.
Is HODL Right for Me?
This is a question that only you can answer. There are several considerations that you need to make when looking to HODL. These are:
- Is the amount of money that you are using to HODL completely disposable? If it isn’t, you could undermine the whole strategy by drawing down on your funds in an emergency.
- Do you know enough about the token you’re looking to invest in to know it categorically isn’t a scam?
- Are you aware of the risks and are you prepared to lose the entire amount you invest if the market turns against your chosen token?
Once you have examined and answered these questions, you will have a better idea of whether HODL is for you. If it is, then it can be extremely profitable in the long run. Many HODLERs who got in early on Bitcoin have made a fortune. The key here though is that they have weathered storms along the way as Bitcoin has crashed many times too. You will also figure out which exchange has the best blockchain technology to provide greater security.