Becoming a Millionaire by “HODL” Investing in Ethereum: A Real Life Story
In the cryptocurrency investing world, the expression “HODL,” has become a catch phrase for holding onto your investments, no matter what ups an downs come your way in the market. HODL is sometimes explained as an acronym for "Hold on for Dear Life," but in reality it was just a misspelling of "hold" in a forum post that went viral. The idea is that cryptocurrency investing is a wild ride, like a rollercoaster. For HODL investors who really believe in the asset they are backing, the strategy is to buckle up, have confidence, enjoy the ride, and never panic sell. People with this strategy believe that we are still in the very early stages of a revolution in technology, and there is lots of growth yet to come.
Perhaps nothing best illustrates the merits of the HODL strategy like a former housemate and friend (let’s call him Steve), who just became a millionaire in June 2017 by HODL investing in Ethereum.
Before we start, let's make one thing clear: cryptocurrencies are NOT an easy path to millions and are full of risk. We use Steve as an example of how one particular strategy of holding and not over-analyzing market movements can pay off.
In 2015, Steve attended a coding bootcamp to learn how to make web apps. He met a couple of guys who were working on the Ethereum project, and got him excited about its potential to pioneer the way currency and the online world work.
Steve put all the savings he could muster (about $15,000) into Ethereum in March 2016 when the price for 1 ETH was about $8.
In June 1016, Ethereum had risen to $21 in value before the infamous "DAO crash" hacking incident sent it down to $15, then further back to the $8 Steve had invested at the beginning. Steve held at $21, and he HODLed at $15 and $8. Not only did he HODL, he also continued to add to his position, buying hundreds more Ether.
In February 2017, the price of Ethereum rose to about $17 again. That’s over a 100% return. Steve held.
In March 2017, Ethereum began its historic takeoff. First stop was about $50. That would have been a 400% return for Steve. He held. There was a dip to $30 during that period that washed 30% off of the value. Still, Steve HODLed and the value of Ethereum returned to $50 in no time.
In the end of April 2017, Ethereum soared to around $80. A 900% return for Steve. Many people would – and did – cash out with such a mighty return. Not Steve. He added to his position, buying hundreds more.
In mid-May, after the price had risen to about $190, Ethereum began plummeting overnight. In less than 2 days, it bottomed out at $110, washing about 40% off of its value. Many, many people panicked and sold at this time. Not Steve. He HODLed.
From May until mid-June, Ethereum experienced a historic rally, topping out at near $400 by mid-June. On June 10, Steve's investment hit the $1,000,000 mark with his investment in Ethereum (by that time, 3,000 - 4,000 Ether). He told me that he wrote down the date and time that it happened, and we went out for dinner and drinks to celebrate his success that night.
Then came a big "correction" in the market. From June 15 - June 26, Ethereum fell from its peak of near $400 to around $200. 50% of Steve's fortune gone, in a matter of days. Steve was no longer a millionaire, but only a few days later, the price had returned to around $300, putting Steve very close to $1 million, once again.
Steve is HODL’ing his Ethereum to this day.
The point of this story isn't to convince you that you can become a millionaire or get rich quick (that's definitely the wrong attitude to have for investing). The point is that regardless of all of these ups and downs, Steve isn't stressing in front of his computer screen. He's not making emotion-driven, panicked decisions or trying to buy and sell micro movements in the market. He's HODL'ing and confident that his investment will continue to beat the previous highs in the future, because he believes in the technology and its long-term potential.
On the other hand, in the case of a crash, continuously buying and never selling can lead to long periods of waiting while your investments regain their value. When to cash out is a tough question. We know people who would (and do) begin to cash out when they reach these kinds of profits. We will talk about some potential strategies for taking profits while holding positions in our forthcoming course.
DISCLAIMER: Cryptocurrencies like Bitcoin and Ethereum are highly volatile and risky. We cannot give you advice about what to invest in or how much to invest. You should take the information we provide in our courses and blog posts, do your own additional research on specific cryptocurrencies, and plan to decide what kind of investments work for you. We highly recommend talking to a financial advisor to understand the level of risk that you are comfortable with.
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