Day Trading Vs. HODLing – Which Strategy Is Better For Crypto Investors?

With cryptocurrency, there are several opportunities to earn money. The most popular strategies are day trading and holding onto holdings (HODLing). The best way to invest in crypto is a debate nowadays. Many individuals give their opinions on the basis of their experience. The basic idea behind day trading is to profit from daily fluctuations in crypto prices by buying and selling the cryptocurrency while acquiring crypto and retaining it for an extended period is known as HODLing. In this article, we’ll dig into each strategy and provide our opinion about which one you should follow owing to the advantages and disadvantages of both strategies. So, let’s start our guide.

Trading Vs. HODLing

To help you understand which strategy is better, jump your feet in the basics of both strategies.

HODLing

Apparently, it should be Holding instead of Hodling. But, it is a meme, which reads, “Hold On for Dear Life through Crypto’s Ups and Downs,” originates from a deliberately misspelt term “hold.” The phrase originated from a 2013 Cryptotalk forum post that included an error in the topic title, “I AM HODLING.” It has since gained popularity in the cryptocurrency world and is now often associated with the “buy and hold” approach. Investors in cryptocurrency have two options to increase their wealth globally. They can either: Acquire and retain cryptocurrency (HODL) or use alternative methods of cryptocurrency trading It’s thought that HODL is a superior method for novices. Although this statement makes sense, there are hazards associated with each of these tactics for novices. New investors can benefit from HODLing mostly because it prevents them from selling their stocks in a frenzy when prices are low. The greatest outcomes, however, are achieved by combining many strategies, such as trading with risk management and an emphasis on ongoing education, or HODLing with an exit strategy.

Day Trading

Within the cryptocurrency industry, day trading is a very profitable online endeavour. You might benefit from your investment by as much as 5% to 10% per day using it. It makes money off of changes in an asset’s price, in this example, the price of crypto. To profit in a day, cryptocurrency traders buy crypto and sell it when it hits their predicted objective.

By trading altcoins at low prices, day trading enables you to accumulate more crypto. However, in day trading, a person can purchase crypto and sell it on the same day. Day trading may be quite difficult for a newbie to understand and requires an in-depth understanding of technical analysis and when to enter and leave a trade. It has a higher risk than return. You must choose whether or not to accept the danger. Professional traders employ resources that a novice may not be able to purchase, such as pricey software, gear, and news sources. It takes a lot of time since you have to stay up to date on prices fluctuations as well as news and events in the cryptocurrency world.

Why HODL?

• Satisfaction: You can stop worrying about brief price fluctuations and watching charts all the time when you HODL. Daily volatility won’t bother you since you know you’re in it for the long haul.
• Enormous Potential Gain: In the past, investing in cryptocurrency, even for a short period of time, has produced returns of far over 1000%. There isn’t a single asset type that has the potential for such massive gains so quickly. You might have made 110% on your investment if you had invested in crypto for only 15 months between 2020 and 2021, turning $5,500 into $65,000!
• Put taxes off: You may be eligible for lower long-term capital gains tax rates than short-term rates if you have been HODLing for more than a year. A larger portion of your profit remains in your pocket and is invested for your benefit.
• Reduce Emotions: You can prevent FOMO or FUD reactions by HODLing. You avoid making impulsive purchases or panicky sales since you have a multi-year time horizon. You are aware that volatility in the near term won’t affect your long-term performance.
• Long-term Benefits: The long-term benefits of HODLing might make it worthwhile to wait and resist temptation.

Drawbacks Of HODLing

• Needs Patience: Even though holding can provide significant long-term rewards, it can be difficult. Bearish times for cryptocurrency demand fortitude and commitment since hopelessness and uncertainty may weaken your resolve. There’s no getting around managing your emotions. 
• Uncertainty: Although well-known cryptocurrencies like ether and crypto may appear to be reliable investments, their brief history does not ensure that they will be valuable in the long run. The regulation of cryptocurrencies and their potential for widespread adoption is yet unknown, which makes investing in digital assets less secure.
• Security Risks: A larger security risk is associated with prolonged HODLing. To protect yourself from the constant threat of cyber theft and hacking, you must become skilled at using self-custody and privacy tools. Losing access to private keys is a common problem that shouldn’t be ignored because they are crucial for protecting assets.

It’s important to remember that day trading and HODLing are acceptable forms of investing. Several investors blend the two in order to expand their holdings. Ultimately, it’s critical to consider the benefits and drawbacks of every approach and decide which suits your investing objectives the best.

Which Coins Can You Safely HODL?

Make sure you fully evaluate a coin’s potential before tying your investment to it for HODLing. A top coin for HODLing is one that has an amazing use case and a sufficiently small supply to guarantee that its value will increase over time. Adopting the HODLing attitude necessitates a commitment to excellence and firm faith in your coin of choice. The risky act of HODLing a lesser market cap asset might result in a bigger treasure trove of earnings, whereas giant market-size coins may provide a more secure journey.

What Risks Are Involved In HODLing?

Investing in an asset at a high price. Maintaining an asset while witnessing its value decline and eventually hit local lows can be a challenging psychological experience.

Ignorance about the appropriate time to “lock in profits.” “Just HODLing” doesn’t result in profit; you can keep an asset for as long as you like. As such, every trader has to know ahead of time what percentage he anticipates selling for. 

Holding Unstable Assets. Investment in the most liquid assets, the market leaders (BTC, ETH, and so on), is the greatest strategy when it comes to HODLing down (HODLing). Projects with less stability, particularly those that are new, may have downside risks and provide higher gains. Even if the market typically rises, they could still be losing money.

How to HODL Correctly?

If you only use free funds that you won’t need in a few years to invest, holding can be beneficial. Additionally, it demands patience and mental stability because you need to hold your coins for a long time. Instead of following the market, investors should constantly adhere to their selected strategy and pursue their own objectives. All choices must be made objectively, devoid of any emotion. 

We advise you not to borrow money to buy coins as it can turn into an extra risk element and frequently results in hasty judgments. Using credit card money for investments is never a good idea. Furthermore, you shouldn’t rely on advice and “signals” from professionals. A crypto investor may only take action based on their own personal analysis of the market and comparison of data from other sources. Such information cannot start an action. Remind yourself that earning money through financial transactions has a considerable risk. Treat them with only consideration and responsibility.

Pros And Cons Of Day Trading

Pros

• One may trade from any location in the world and maintain many positions concurrently.
• Since positions are not held overnight, there are no overnight financing fees.
• Volatile and offers the chance to respond quickly to potentially profitable changes in the market.
• Gives the chance to utilize an automated trading system to replace the human element and trading errors in the repetitious components of day trading. This system is built on past knowledge and experience.
• Cons:
• There is very little probability of becoming wealthy or generating a huge profit from a single large deal; instead, wealth is often acquired over time via a number of smaller transactions.

Cons

• Due to the several positions maintained and the rapid activity in the financial market one is involved in, multiple transaction fees are applicable.
• Extremely time-consuming and necessitates regular, methodical market condition analysis.
• Profits are accumulated gradually over time, therefore there’s a chance you might lose everything in one big loss.

Final Remarks

While HODLing is easy to understand, it does not guarantee a rapid profit. If you have the patience to hold your assets for the long term to gain an advantage, then it’s right for you. Otherwise, you can opt for day trading. Day trading is more difficult, involves greater risk, and requires extensive knowledge about trading. However, there is also more possibility for short- and medium-term gain.

That being said, HODL is better suited for novices as it doesn’t require knowledge of trading. However, a novice cryptocurrency investor with some knowledge of market research and exchange protocols may try their hand at trading. But, we don’t advise opening trades for more than 1% of the entire portfolio in this instance.

Combining a short-term trading strategy with a long-term holding approach yields the best profits. However, investment in trading bots like Bitcoin Evolution should generally be done thoughtfully. A conservative and circumspect approach entails researching every form of market analysis that is now accessible, utilizing exchange-based educational programs, doing a thorough theoretical examination of the subject, and only then going on to actual activities.