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HODLing and the Long Haul

By Ashish Singhal, CEO and Co-Founder at CRUXPay and CoinSwitch.co

If you’re getting into bitcoin with the hope of getting rich quick, you’re going to be disappointed. While it’s true that bitcoin did make a few lucky early adopters very rich very quickly, making a few people wealthy has never been cryptocurrency’s use case. To say that Bitcoin exists to concentrate wealth is like saying the internet exists to line Jeff Bezos’s pockets.

No, bitcoin was invented as a new store of value and a new means of transaction for a borderless digital world. While a few small-time bitcoin holders still expect to be millionaires after the next bitcoin halving this year, most of the community has grown realistic. Perhaps the best indicator of this trend is the number of community members who don’t trade, who treat bitcoin like a commodity instead of a digital dollar voucher. These “HODLers” know they could earn large sums of traditional fiat currencies if they turned in their bitcoin, but they’re in for the long haul. 

The HODLing trend isn’t a hunch based on few Telegram messages or a suspicion backed by anecdotal evidence; blockchain analysis shows that more and more people and institutions are warehousing their crypto. A January 2020 study determined that 10 million bitcoin have not moved in more than a year; no such long term stability had been recorded since early 2017. There’s also evidence that people or groups holding bitcoin have doubled down and consolidated their stake: Over the past year, there’s been an 11% increase in the number of wallets holding one or more full bitcoin. Many bitcoins now reside in offline “cold storage” because their owners expect to hold them for the foreseeable future.

HODLers generally believe that their bitcoin will grow in value, but this is far from their only concern. They appreciate that bitcoin will appreciate only when it becomes not just cool — it’s entirely digital money! — but also convenient. The earliest computers were useful for limited purposes, but each machine required maintenance staff, hundreds of square feet, a suite of punch card programmers, and hundreds of thousands or millions of dollars in construction and installation costs. When computers became smaller, faster, and more manageable, they became broadly useful. Even thirty years ago, few people would set up their computer without extensive resort to thick manuals. Today, most new computers don’t even include printed instructions in the box. There’s less friction and exponentially more convenience. Bitcoin is following a similar path.

The wisest HODLers expect their bitcoin’s value to grow over time because they believe that the use cases for cryptocurrency will multiply. What drives this expansion of functionality? To some extent, it’s simple improvement in computers and design: The world is exponentially more connected than it was a decade ago, and barriers to adoption fall by the hour. The mobile frameworks that power so much of our commerce and communication today were comparatively feeble when Satoshi Nakamoto described the Bitcoin protocol; most people didn’t even own a smartphone at that point. 

No corporation or government controls Bitcoin. This is, of course, one of the currency’s great advantages, but it also means that there is no central body advertising the currency, pitching it to journalists, partnering it with merchants, and running its influence campaign. Bitcoin has grown by word of mouth, and today that word has spread far from the currency’s obscure origins on a little-known forum. Every day, people hear about cryptocurrency for the first time; they hear about it on cable news, see a reference on Twitter or Facebook, or even pick up a primer at their local bookstore. 

Though HODLers don’t have purely financial motives, the faith in bitcoin they display may well move the commodity’s price higher. HODLing creates a virtuous cycle: The more people publicly (remember that the blockchain is publicly legible!) express their faith by storing their coins, the more others will be moved to imitate, and the scarcer and more desirable bitcoin will become. HODLing may not be its own reward, but it promotes the creation of rewards: More value and more usability. 

Specific predictions about the development of the cryptocurrency and blockchain worlds are notoriously difficult to make, but it seems clear that HODLing, like bitcoin, is here to stay. Anyone interested in bitcoin should be grateful for their lead: They’ve inspired adoption, promoted innovation, and changed the cryptocurrency conversation. Perhaps the best way to thank them? Join their ranks.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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