The HODL Approach Might Be The Reason For The Market Manipulations. And We Can Blame Only Ourselves.


Opinion – HODL (or hodling, based off of the phrase – hold on for deal life) has become a signature strategy for how to make significant gains as a crypto trader: Simply identify the coins you think have long term value, invest in them, and then hold your position even through the worst downward trends.

HODL

Eventually the crypto markets will hit another bull run, and your sacrifice will undoubtedly pay off with 10-100x returns.Although this strategy may seem wise, it is actually doing long-term damage to the crypto markets.In fact, anyone who expects the HODL approach to make them rich is not only allowing whales to more easily manipulate the crypto markets, but is also implicitly asking for market manipulation to occur. 

A ‘Whale’ is an individual or group of people that can manipulate the market using their massive crypto wealth. Their influence comes from the fact that they are able to place large orders (usually on low cap altcoins), which creates a ripple effect of smaller buyers looking to get in on the latest coin that they perceive will go up in price because it has been ‘endorsed’ by a large player.

The transparency of the blockchain makes it so that everyone can see the transactions being made as well as their size. How is this all connected to hodlers? Hodlers would rather keep their coins in a wallet than spend it on whatever good or service it was intended for.

This action leads to a reduction in trading volume for those coins. Low trading volumes make it easier for whales to make buy or sell orders that have a large ripple effect on the market.

In a healthy crypto market, where coins are traded based on utility instead of speculation, whale sized transactions are more likely to be lost in the shuffle of everyday market activity. This is ultimately a positive thing, as it reduces their overall influence on the market (people are less likely to buy or sell based on short trends when they have their own agendas for spending coins).

The hodler plays the role of a spectator, giving power to big movers in the market to affect his/her holdings. By contrast, the utility token trader is actively involved in creating market value. Their transactions are primarily for their daily needs within functioning blockchain ecosystems.

As these ecosystems become more relevant in the average person’s everyday life, the crypto community will no longer trade coins based on what is speculated, but instead on what is useful. Whales won’t have much room to profit in this new market, and will settle for smaller gains from their pump and dump schemes.

Ultimately, it is primarily the responsibility of the crypto community, and not regulators, to fight market manipulation. The HODL strategy masks itself as an intelligent play to seek long-term value.

However, the real value is in discovering which blockchain ecosystems are creating products or services that you personally benefit from, then acquiring their tokens with the intention to actively spend them like you would any stable fiat currency.

Only when we expect to get more value from the platform, than we do from the capital gains earned through its tokens, will the influence of whales that lead to market manipulation be minimized.

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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