In a famous BitcoinTalk post from 2013, a frantic trader misspelled the word 'hold' in his title "I AM HODLING" under which he explained his refusal to sell even as Bitcoin began its agonizing year-long crash from nearly $1200 all the way down to roughly $200.
Since then, the term HODL has often been used in the cryptocurrency space as a reminder to never sell your crypto, especially amid market turmoil.
While remaining level-headed during market volatility is certainly important, is simply HODLing our crypto assets the best long-term strategy?
Why We HODL
We need to recognize that we were introduced to crypto while in a TradFi mindset. As a result, we felt the need to categorize Bitcoin as either a traditional commodity or currency, even though it was neither, but rather something novel and different.
Bitcoin was originally intended to be a form of peer-to-peer cash (a currency), but has since been re-branded as "digital gold", and if we think of Bitcoin as a precious metal, it makes sense that we would just leave it untouched in a safety deposit box. But what if we are misunderstanding?
Ethereum launched years later and introduced the idea of a "token", and due to our TradFi mindset many of us quickly categorized these novel things as traditional securities (ie: stocks), without fully understanding their programmable utility.
In TradFi, we buy commodities and stocks and just wait for their prices to rise. In crypto, we need to consider that value accrual may work differently.
Economic Activity
Back in the early 2010s, Bitcoin was increasing in value particularly because businesses started using it to enable uncensurable commercial transactions. However, since re-branding itself to digital gold in 2017, the economic activity has shifted elsewhere.
Ethereum not only captured much of the activity, but enabled user incentives as well. For example, if instead of just HODLing your ETH you had actually made some trades on Uniswap, you would have been rewarded with some of their governance tokens.
Consider the case of DePIN networks too, where people lend their hardware to a network and receive rewards in return. Over time, participants earn a reputation as a consistent contributor to the network because their address shows regular activity.
Web3 Reputation
You can cultivate a reputation gradually in Web3, especially on a platform like HIVE, where blog posts, comments, upvotes, and threads are all immutably written to the blockchain, and linked to your account.
So instead of just holding the private key to an anonymous UTXO that represents a dollar amount, you can actually prove ownership of an account that demonstrates your contributions to a network.
Your reputation can be further enhanced by participating in governance.
Governance Voting
Censorship-resistant blockchains allow us to operate within decentralized autonomous organizations (DAOs), where we can vote on block producers, protocol changes, and spending proposals. As you cast your votes, you further add to an immutable reputation.
Consistent voting not only improves your overall reputation, but also demonstrates that you're an active community member, and should increase your chances of receiving community airdrops in the future.
Ethereum co-founder Vitalik Buterin recently brought up a good point on X explaining how zero knowledge (ZK) attestation could be used to help identify the most active members of a community, and create more egalitarian token distributions.
The Value Of Active Participation
Crypto transcends TradFi by enabling a trustless economy encompassing decentralized identification, reputation, and governance.
By actively participating in crypto projects you are building a personal reputation, which could end up being much more valuable in the future than just HODLing coins.
If you learned something new from this article, be sure to check out my other posts on crypto and finance here on the HIVE blockchain. You can also follow me on InLeo for more frequent updates.
Until next time...