#HODLgang – you might have recently come across this hashtag. You’ve certainly come across the term ‘hodl’.
Without going into the history of the famous forum post typo, suffice to say that it became the deliberate misspelling which now embodies the values of a whole subculture within the cryptocurrency space.
At first sight it seems attractive – redolent of the defiant Dunkirk spirit which has, of necessity, been manifest by long traders in crypto since the beginning of the present bear market. But, as I write this post, I come at it convinced that a nasty surprise awaits Bitcoin hodlers in the next few days and I’m happy to be specific – I mean the period up to 14 April 2018.
I already hear the cry ‘FUD!’ coming back at me from some quarters, to drown out my voice. And that is what this article is all about. (This piece isn’t about BTC/USD price predictions for the next few days. See our TA Experts page for that.) What is the HODL Cult mentality and why does it matter?
Before we go any further though, let’s remember the perfectly understandable reason that many hodlers have for hodling. It’s something that haunts and eats away at those who have been involved with Bitcoin on and off for several years. They see the long-term picture going back to 2013 and beyond, and BTC’s price cycles have required a great amount of patience but the price has always come back in the end, and to new all-time highs. In fact, Bitcoin’s exponential price growth means that an investment of just a few dollars in 2010 would make that investor a multi-millionaire today. Many of today’s staunch hodlers either bitterly regret selling off during the bear seasons such as 2014, or they know of someone that did – someone who would have been very rich right now if they had only hedl (held) instead of selling.
The cheerleaders and KOLs (key opinion leaders) of the HODL Cult seem to be engaged in the constant upholding of a worldview from a parallel universe – one in which its proponents are kept in check by the same brainwashing techniques used by cults the world over.
- Discredit anyone by labelling those who oppose the bullish view. Dismiss genuine bad news as FUD (fear, uncertainty and doubt). In the best tradition of the politically correct age, you silence your opponent by coming up with a label that others will fear having attached to them. Instead of being a something-o-phobe you are ‘spreading FUD’. As Jordan Belfort, Wolf of Wall Street says himself, such things are ridiculous terms, not found anywhere else in financial markets. Elsewhere in finance, there is good news and bad news, and, as with all good peer-reviewed academic studies, people should verify and corroborate their information sources. But what Trump started with accusations of ‘fake news’ the HODL Cult has continued with the label of FUD. And, in the best traditions of any witch hunt, anyone even trying to defend what others call FUD, or trying to reason with the hodl fanatics, gets hit with the same label likewise themselves. An example would be how hodl-fanatics denounce posts such as this one as being the frustration of bears spilling over ‘because our shorts are in the red’! I and the good TA people are quite happy to go bullish again as soon as the market genuinely turns. It’s much more profitable than going short.
- Create a sense of superior comradeship. There are lots of chat groups, forums and twitter handles around which hodlers gather, but you often hear people talking in the vocabulary of St George vs the dragon, or David and Goliath, or the hodler versus the weak hands. There is no better hope outside of hodling’, they say,‘so don’t go looking for anything else.’ i.e. they say that no one can predict where the market is going next or when bull will change to bear and back again, therefore there is nothing better than to hodl on. The awkward truth, though, is that some TA people were indeed predicting back in Feb that the 6 Feb dip wasn’t the bottom and that we would go low again in March/April. So it clearly is possible to predict and the HODL Cult is not a place of superior comradeship.
- Guilt and manipulation. They accuse those who sell and go short of bringing down the market to zero, slowing the technological revolution etc etc. Of course, it is preposterous to suggest that small retail traders can bring down the market, when the likelihood is that the lower the dip, the more quickly and more strongly the bull market will come back. Institutionals and new money that feared they had missed the boat of 2017 can now come in more cheaply.
- Moving the goalposts. When the HODL KOLs promises of BTC not going any lower get broken by lower and lower lows, they just shift the boundaries, and the hodlers keep listening to it, because nobody wants to hear about the market going even lower. They have their own TA people say that if a certain support line is broken it means a bearish scenario coming, but then next week they just make bullish predictions again, deleting old social media posts which could cause embarrassment.
- Blames others for its own faults. When some hodlers crack and sell at a loss, they are told that it’s their fault for not waiting longer, even though its really the HODL Cult’s fault for encouraging people to hold when they should have been encouraged to change direction weeks/months ago. The market is going down/up according to irresistible long-term TA laws and patterns. Don’t try to brainwash people into thinking that defying the tide on the beach will be successful or not depending on the degree of their psychological commitment, or their solidarity with other hodlers, or on there being maintained some critical mass or given number of hodlers at all times. Under this heading also comes the twisted polarised thinking that sudden dips are caused by outrageous manipulators, while price rises are only the fruits of hard work on the part of hodlers and crypto-warriors. Pathetic! Grow up!
While I do not share Jordan Belfort’s apocalyptic prognosis for the crypto market, or his unremittingly negative view of the asset class in general, his commentary on what I have termed the HODL Cult and its mentality is very helpful. Perhaps because, rather than in spite of, his dishonest past, he shows a paternal spirit absent among the hodl KOLs. There is a sincere passion with which he brings the common sense of someone who knows Wall St and is in a position to compare crypto-land with the grounded thinking in more mature financial markets.
Don’t get me wrong. I’m not calling all hodlers hypocrites – far from it. Many are naive and just badly led.
At this point I want to deal with one specific claim you hear time and time again in the crypto space. ‘I’m in this because I really believe in blockchain. I don’t care if my portfolio is going down right now.’ What utter rubbish! Blockchain will either go forward or backward at its own pace, raising money in a proper way, or riding a wave that is largely funded by the big players, regardless of sacrifices from the smaller fish. People are trying to kid themselves and others, the same way that people buy lottery tickets and then talk about the good causes supported by the profits. You’re doing crypto to make money – simple as that – and there’s nothing wrong with that. Stop pretending. You’re in this asset class because, despite its high risk and volatility, it offers the potential for rapid rewards that are whole orders of magnitude above the return on offer from bank deposits, stocks and bonds.
We often see HODL leaders getting sniffy on CT (crypto twitter), and writing in a tone of voice so as to take the moral high ground, and suggesting that some people don’t care about crypto because they’re selling, i.e. they’re not prepared to sacrifice their portfolio values for the advance of blockchain technology. But ask yourself whether the writer really just wants others to carry on hodling, in order to help shore up his/her own red positions. This is manipulative and deceitful in the extreme – but it is also rank hypocrisy.
Believe in the tech? Get a job in blockchain! Want to change the world? Join an NGO or do charity work! Want to make money for yourself. Go short/long in crypto. Just keep crypto/financial activities in one basket, and altruism in other. Don’t try and mix them in order to kid yourself or to kid others for your own convenience.
None of these crypto-assets have value until one day you sell them. You can’t eat them, sleep under them, or even spend them in the shops (for the most part). Everyone will have to sell some day. So what is it to that person lecturing you to hodl, if you have come to the conclusion that your time for selling must come sooner than theirs. There is no logic in their argument, and it even appears that there is more in their thinking than just trying to prevent prices going down. We saw this in the Ripple craze at the start of the year. Lots of people talking about hodling together in order to pump the price. Surely if these projects are so good, they will rise in value on their own, and in their own good time, without attempting to manipulate the market?
All of this thinking is dangerous for a number of reasons.
- Most immediately, in the short term, the cult is persuading people that BTC has bottomed out at $6-7k, and by manipulating the TA (instead of allowing TA to just honestly tell its own story) they are giving people a false sense of security, which is about to be shattered as we go sub-6k in the next few days, and then sub-5k shortly after that. Then people get turned off crypto altogether, and throw the baby out with the bath water, when it was really only the bad advice of the HODL Cult and their perma-bull thinking which lured them on to the rocks. These are the same people who assured their followers in early March that BTC wasn’t about to go sub-10k again, and who, in the first week of January 2018, had also forecast a total crypto market cap of $1 trillion dollars by mid-January! No public apologies were tendered afterward by these people for leading others astray.
- The risks of hodling are only properly offset for those who can afford to tie up money for a very long term, i.e. until the next ATH which could be years away. Many in the space need access to the liquidity again in weeks rather than months or years, but they have recently overextended themselves during the recent bull market into using funds that they need access to much sooner.
- The hodl mentality seems to spill over from Bitcoin to Altcoins, the history of which shows us that while some survive for the long term, many will never recover to all-time highs and will die off in a dwindling pool of liquidity and trading volume.
- Even if hodling for the next ATH pays off one time, it gives a false sense of empowerment that if enough people hodl together, they can overcome the forces of the market and the natural long-term price cycles – this is arrogant in the extreme and sets up even the hodlers of the better coins to be left holding the bag of the big whales. The same HODL KOLs mentioned above are misleading people into thinking that it is the small hodlers who are now keeping the BTC market up at its present 6-7k price. Wrong. Market forces can push this a lot lower yet.
- It encourages a lazy and simplistic trading philosophy. When investors should be encouraged to maximise gains by trading with the trend when it is going down, and then going long when it bottoms out, the hodlers are having to wait for high tide to re-float their beached vessel. That is to say that the price will have to come a long way back up before they even break even again, let alone see green. So the doctrine is mathematically as well as morally bankrupt.
Where do we go from here?
Something positive can come out of realising that the HODL Cult has let you down. You can come away and reevaluate which TA people you follow, and resolve to teach yourself more trend analysis rather than just blindly following others. You can put your financial interests first, remembering that crypto is just a financial market like any other, and shorting is no more or less ethical than trading long.
Where is coin❖trellis coming from in all of this? We say: follow the good TAs. Go long when the outlook is genuinely bullish, go short when it’s genuinely bearish, and stay in fiat cash whenever you’re unsure. Just don’t get stuck trading in one direction all the time, like King Canute on the beach with the tide coming in. Don’t do it because others around you are telling you to do so, or because you feel trapped like a rabbit in the headlights, or because you have confused the revolutionary and bright future of blockchain technology with the short-term prospects of coin/token prices.