Asher Draycott Jan
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Benefits and Risks of HODLing Crypto: What Really Happens When You Hold Through the Crash

When Bitcoin dropped 75% in 2022, some people sold in panic. Others held on. Those who held-HODLers-watched it bounce back to new highs by 2024. But not everyone who held came out ahead. Some lost everything when their favorite altcoin vanished overnight. HODLing isn’t just a strategy. It’s a test of nerves, belief, and patience. And it’s not for everyone.

What HODLing Actually Means

HODL started as a typo. Back in 2013, a Bitcoin forum user meant to type "I am holding" but wrote "I AM HODLING" after a rough day of trading. The post went viral. The misspelling stuck. Soon, people turned it into a backronym: "Hold On for Dear Life." It became the crypto version of "buy and hold," but with way more drama.

Unlike traditional investing, where you buy stocks based on earnings, dividends, or balance sheets, HODLing crypto means holding because you believe the asset will be worth more years from now-no matter what happens tomorrow. You ignore the 30% daily swings. You don’t check your wallet every hour. You just wait.

Why People HODL: The Real Benefits

The biggest reason people stick with HODLing? Volatility doesn’t hurt you if you don’t sell.

Bitcoin fell from $69,000 in November 2021 to under $16,000 by November 2022. That’s a 77% drop. If you sold then, you lost most of your money. If you held, you watched it climb back to over $70,000 by early 2024. That’s not luck. That’s history repeating. Bitcoin has done this three times since 2013. Each time, it recovered-and then some.

HODLing also saves you money on fees. Every trade costs something. On Binance, a round-trip trade is 0.2%. Do 100 trades in a year? That’s 20% of your capital gone just in fees. HODLers avoid that entirely.

Then there’s taxes. In the U.S., the IRS treats crypto as property. Every time you sell, trade, or spend it, you trigger a taxable event. If you bought Bitcoin at $10,000 and sold at $50,000, you owe capital gains tax on $40,000. HODLers don’t pay that until they cash out. That’s a huge advantage for long-term investors.

And some coins pay you just for holding them. Ethereum, Cardano, Polkadot-after they switched to proof-of-stake-you can earn 3% to 5% annual yield just by staking your coins. That’s free money. No trading needed. Just lock it up and wait.

The Hidden Risks: When Holding Turns Into Losing

HODLing sounds simple. But it’s not risk-free.

Crypto has no intrinsic value. Stocks have earnings. Real estate has rent. Bitcoin? It has scarcity-only 21 million will ever exist. But that’s it. No cash flow. No dividends. No balance sheet. Its price moves on hype, fear, and speculation. That’s dangerous.

In 2018, Bitcoin dropped from $19,783 to $3,237. That’s an 83% loss. Ethereum crashed 94%. People who HODLed through that lost most of their net worth. And they had no safety net. No pension. No job. Just a digital wallet.

Then there’s the tech risk. About 20% of all Bitcoin-roughly 3.7 million coins-is permanently lost. People forgot passwords. Lost hard drives. Sent coins to the wrong address. There’s no customer service. No reset button. If you lose your keys, your money is gone forever.

Exchange hacks are real. Mt. Gox lost 850,000 BTC in 2014. Poly Network lost $600 million in 2021. Even Coinbase, one of the safest platforms, has had security scares. If you keep your crypto on an exchange, you’re trusting someone else to protect it.

And regulation can kill your investment overnight. China banned crypto in 2021. The market dropped 30% in a day. Turkey, Russia, and India have all cracked down. The U.S. SEC is still deciding which coins are securities. If your favorite token gets labeled one, it could vanish from exchanges. Poof. Gone.

A woman places crypto keys into a lantern-shaped hardware wallet, surrounded by floating, glowing coin icons in a sky cabin.

The Terra/Luna Collapse: When HODLing Kills Your Portfolio

In May 2022, TerraUSD-a so-called stablecoin-lost its peg to the dollar. Within days, its sister token, Luna, crashed from $80 to $0.0001. People who HODLed Luna lost 100% of their money. No recovery. No bailout. No second chance.

This wasn’t a market dip. This was a total failure of the system. And it showed that not all crypto is the same. HODLing Bitcoin is one thing. HODLing a low-cap altcoin with no real use case? That’s gambling.

Is HODLing Better Than Other Strategies?

Some people try to time the market. They buy low, sell high. But crypto moves too fast. A 2023 Bitwise study found that missing just the 10 best trading days between 2018 and 2023 turned a 1,200% return into 150%. You don’t need to be right all the time. Just one missed day can ruin your results.

Dollar-cost averaging (DCA)-buying small amounts regularly-is a smarter middle ground. River Financial found that DCA outperformed lump-sum buying in 63% of 3-year periods since 2013. But even DCA isn’t HODLing. It’s still buying. HODLing is about holding what you already have.

Compared to stocks? Bitcoin’s returns are wilder. The S&P 500 returned 10.2% annually over 94 years. Bitcoin? From 2013 to 2024, it returned over 1,000,000%. But that’s not normal. It’s an outlier. And it came with 80% drawdowns. You can’t predict when the next one will hit.

What Experts Say

Michael Saylor, CEO of MicroStrategy, bought over 157,000 Bitcoin for his company. He calls it "digital gold" and says HODLing is the only sane strategy. He’s right-so far.

But Nobel Prize winner Paul Krugman calls it a "greater fool theory." He says someone will always pay more for something worthless-until they don’t.

Cathie Wood from ARK Invest predicts Bitcoin could hit $1 million by 2030. JPMorgan says it’s worth $35,000 based on gold’s market cap. Neither is wrong. Neither is certain.

The CFA Institute says crypto might make sense as 2-5% of a diversified portfolio. Anything more? Too risky.

A child and elder walk through a forest of blockchain trees, one holding a flickering meme coin, the other a steady Bitcoin token.

Who Should HODL? Who Shouldn’t?

You should HODL if:

You understand crypto is speculative, not a guaranteed investment
You can afford to lose the money you put in
You’re not checking your portfolio every hour
You’re holding Bitcoin or Ethereum-not some random token with a meme logo
You’re okay with waiting 5, 10, or even 15 years

You shouldn’t HODL if:

You need the money in the next 3 years
You’re using credit cards or loans to buy crypto
You’re putting more than 10% of your net worth into it
You’re chasing quick riches
You don’t know how to store your keys safely

What’s Changed in 2025?

The 2024 Bitcoin halving happened. Historically, that’s triggered big rallies. But this time, the market reacted differently. Institutional demand was already high. The price didn’t spike like in 2020. It crept up slowly.

Bitcoin ETFs are live in the U.S. Fidelity and BlackRock now offer crypto in retirement accounts. That’s huge. It means regular people can buy Bitcoin like they buy Apple stock.

But regulation is tightening. The EU’s MiCA rules, the U.S. SEC’s crackdown on exchanges, and new reporting requirements mean HODLers can’t stay anonymous anymore. You’ll need to report your holdings. Your wallet won’t be invisible.

And energy use? Bitcoin still uses as much power as Greece. That’s not going away. But newer blockchains like Solana and Polygon use 99% less. If you HODL, consider switching to greener coins.

The Bottom Line

HODLing crypto isn’t a get-rich-quick scheme. It’s a long-term bet on technology, scarcity, and adoption. Some people made millions. Others lost everything. The difference? Discipline. Patience. And knowing the difference between Bitcoin and a meme coin.

If you HODL, do it right. Stick to Bitcoin or Ethereum. Keep your keys safe. Don’t put your rent money in. And don’t expect it to go up every year. It won’t. But if you can survive the crashes, you might just win the game.

Is HODLing crypto still a good strategy in 2026?

Yes-but only if you’re in it for the long term and understand the risks. Bitcoin has recovered from every major crash since 2013. But altcoins can vanish overnight. HODLing Bitcoin or Ethereum with a small portion of your portfolio (2-5%) is still a reasonable bet. HODLing random tokens? That’s gambling.

Can you HODL crypto without an exchange?

Absolutely. In fact, it’s safer. Exchanges can get hacked or shut down. The best way to HODL is to store your crypto in a hardware wallet like Ledger or Trezor. These are physical devices that keep your private keys offline. You control everything. No middleman. No risk of the exchange freezing your funds.

What happens if the government bans crypto?

If a country bans crypto, you can’t trade it legally there-but you can still hold it. Your coins don’t disappear. But selling or using them becomes risky. In China, people still hold Bitcoin, but they can’t use exchanges. In the U.S., outright bans are unlikely, but heavy regulation could make trading harder. HODLing means accepting that governments may try to control it.

Does HODLing work with altcoins?

It can-but it’s far riskier. Most altcoins have no real use case, weak teams, or no adoption. Over 90% of altcoins have lost 90% or more of their value since 2018. Only a handful, like Ethereum, Cardano, and Solana, have survived long-term. If you HODL altcoins, treat them like lottery tickets-not investments.

How much crypto should I HODL?

Only what you can afford to lose completely. Most financial experts recommend 2-5% of your total portfolio. If you have $100,000 in savings, that’s $2,000-$5,000 in crypto. Never use emergency funds, retirement money, or debt to buy it. Crypto isn’t insurance. It’s speculation.

Do I need to pay taxes if I HODL?

No-until you sell, trade, or spend your crypto. Holding doesn’t trigger taxes. But if you sell at a profit, you owe capital gains tax. In the U.S., if you hold over a year, you pay lower long-term rates. Keep records of your purchase price and date. Tax software like Koinly or CoinTracker can help track this automatically.

Asher Draycott

I'm a blockchain analyst and markets researcher who bridges crypto and equities. I advise startups and funds on token economics, exchange listings, and portfolio strategy, and I publish deep dives on coins, exchanges, and airdrop strategies. My goal is to translate complex on-chain signals into actionable insights for traders and long-term investors.