Schooled by Breach 003: Do you know when to Hold On for Dear Life?
Welcome to Schooled by Breach! Our latest weekly newsletter where Breach writer, Adetomiwa talks to people with experience about pressing crypto questions, learns a lesson and shares the findings with you. Crypto can be easy, so let’s figure it out together. Out every Friday
TL;DR
Deciding what projects to HODL is a personal choice. For serial crypto investor Nnamdi, after two years of investing, some of his determinants are: “the team behind the project, their goals, and how I feel about their vision”. He believes being sentimental is one of the fastest ways to gather loss in any investment, including crypto — remember why you bought into a project and let that guide what you HODL.
As a kid, I wasn’t too sentimental, but I had a few things I couldn’t let go of: my bootcut jeans, a necklace my uncle gifted me, and my blue school bag. Let me tell you about my bag.
It was the end of the summer break and my mother brought home a new school bag like she always did. But this time, it was in my favourite colour — blue — and had little stars around it that I adored. I did my best to never let this bag out of my sight.
By the end of the school year, my bag was starting to rip and my mum was ready for a new one. I begged to keep my blue bag, I got my aunt to mend it and insisted that it was still good, despite the stubborn stains. I was Holding On for Dear Life 😏.
One weekend, I came home to a new bag but still, I refused to let the blue bag go. I had it for about four more years until I decided on my own that I was done with it.
Even as a kid I wasn’t a stranger to the idea of holding on to something for better or worse, so I got curious when I heard of the crypto concept “HODL”, the acronym for Holding On for Dear Life.
I wanted to find out: What does it mean to HODL and when is it a good idea to do so?
To feed my curiosity, I got on a call with Nnamdi, a serial crypto investor who has been in the game since the start of 2020.
HODL is a financial strategy where you hold on to your crypto asset, regardless of how the market is moving. Nnamdi believes that HODL’ing is a “very good financial strategy”, which is probably why investment circles outside crypto have also started to adopt it.
Nnamdi explains that a lot of people get into crypto for short term gains — buying crypto and selling early — which is okay if that’s what you’re looking for. But HODL is more of a long-term strategy, for assets you intend to hold on to long-term and believe will grow exponentially over time.
He decides on projects to HODL through research and personal conviction. He asks himself if he believes in the project, “the majority of the time, I look at the team behind the project, their goals, and how I feel about their vision”. He also explained that there are technical things to look out for like market cap, current price and circulating supply.
There have been cryptocurrencies that Nnamdi bought early and because their vision is still aligned, he still has them; like Binance Coin (BNB) — his retirement plan (he is in it for the long haul) — and Polygon (MATIC). There are however others like Cardano, which he intended to hold but decided to let go because they weren’t growing at the pace he expected.
He warns that, as with every investment strategy, his method isn’t fail-safe. There have been crypto coins he sold because he believed a business decision they made wasn’t favourable but now regrets because they’re still doing quite well, and some he held on to until he lost money.
Regardless, he has a strategy for preempting loss: never invest money you absolutely need. “If you can’t afford to lose 30% of your investment in crypto, you are overexposed, which means you’ve put way too much money into crypto”. You can start your investment with as much as $5, or an inconsequential percentage of your salary.
💡 If you already have money set aside for investing, crypto content creator, Adeniyi, advised us in a previous Schooled By Breach issue to start by putting 1–2% in crypto.
Nnamdi’s beginner’s guide to HODL
Like most people, one of Nnamdi’s earliest concerns was the volatility of the crypto space, but with research, speaking to his more experienced friends and his own experience, he began to realise that the volatility is relative. He uses the current crypto market as an example “We’re currently saying Bitcoin is dipping at about $40k [Price as of 18th of February], but this was the highest at a time. If you bought Bitcoin when it was at $20k, you’ll still be in a pretty good position”
Nnamdi acknowledges that “do your own research” is not always the best advice because it’s not very easy to know where to begin, so he advises beginners to start with well-known cryptocurrencies like Bitcoin and Ethereum, while you learn how to research newer projects.
“Influencers have been paid to promote crypto coins”, he warns, so take things you see online with a grain of salt.
And as you become more comfortable and start taking on lesser-known cryptocurrencies, don’t get too sentimental. “Don’t get attached to any cryptocurrencies. If you believe a project is stagnant, or the community isn’t growing and you want to sell your position, do it”, says Nnamdi.
How do you know when to sell?
Nnamdi says he sometimes sold his crypto when he needed the money and sometimes when he was tired of holding on. But ultimately, it’s up to you. Sell when you feel you have made enough profit or if you’re incurring more loss than you are comfortable with.
