Table of Contents:
- 1. Bitcoin is not meant to be passive
- 2. Is it even possible to use Bitcoin as a payment method?
- 3. Use CryptoRecycling to improve your hodling strategy
- 4. It applies to other altcoins as well!
- 5. Summary and conclusion
HODL is a term that appeared in the world of cryptocurrency quite a long time ago. Today a lot of people believe that in a long-term, this is one of the best strategy for crypto trading you can choose. However, did you know that HODLING is not a very attractive way of behaving from the point of view of the entire cryptocurrency?
More than 6 years ago a certain user misspelled the title. Instead of “I am holding”, he wrote “I am hodling”. From this moment, the mistake in spelling became much more than just a mistake or a meme. At this point, it is believed to be one of the best strategies for crypto investing.
In a nutshell, it all started from the guy, who wanted to hold on to Bitcoins for as long as it is possible – just to profit from them. However, the moment when everyone started panicking as the value dropped significantly, he sold his assets almost immediately, making huge losses. This was the beginning of inspiration to many people who were interested in the long-term profits.
From that moment onward, ‘hodl’ became its own word and it referred to an investment technique, where we simply kept our funds for as long as it is possible to the moment they finally started to bring some profits. It is simply a belief that unlike gold, Bitcoin will grow rapidly.
Bitcoin is not meant to be passive
One of the reasons why Satoshi Nakamoto wanted to create a decentralized and accessible currency was to use it anywhere and by everyone. No matter what political or economic situation you would be. It is obvious that Bitcoin is still easily accessible and everyone can use it. We can, for example, use it as a means of very fast and cheap payments without third parties or intermediaries.
The technology hiding behind this cryptocurrency was a huge inspiration for not only the people who wanted to use it the way we just described. A lot of investors noticed its gigantic potential and knew that in the near future, Bitcoin will grow. For this reason people divided onto traders and hodlers. Obviously, holding on to a currency is not a bad idea. However, we need to bear in mind that the less currency there is in circulation, the lower available supply. It corresponds to a lower demand as well. Let us picture a scenario, where everyone decides to become a hodler. In such situation, Bitcoin would not only lose its purpose, but also its value. An appropriate economy requires a currency to be used as either a payment method or in order to exchange it for something else. The moment we all decide to hodl our Bitcoins, they will be no longer BTC economy, since it wouldn’t be possible to utilize it in any way.
To sum up, the idea of hodling may not be a bad idea for an individual. However, the currency is meant to be transferred. It is meant to be used in order to let its economy be healthy and to fulfil its purpose.
Is it even possible to use Bitcoin as a payment method?
There are people who believe that using Bitcoin to pay is not a good idea. The most common arguments against are the high transaction costs (compared to, for example, bank transfer fees), price volatility, the problems with scalability, and so on.
Of course we should bear in mind that constantly developing technology and introduction of interesting novelties, like for example the Lightning Network, make some of the troubles mentioned above less troublesome. The statistics are the best proof that more and more people are interested in using Bitcoin as payment method. To say more, there are 700% more shops, merchants, business owners, and markets that accept Bitcoin as a payment method. Interestingly, even huge market chains think about leaving Visa and move on to Bitcoin provided the Lightning Network technology fulfils its purpose. A lot of magazines believe that once a huge market starts to accept Bitcoins as a method payment, the adoption of Bitcoin may be much quicker than it is anticipated.
Unfortunately, quite large amount of hodlers make it less viral than it could be. As a result, all cryptocurrencies, including Bitcoin and the most popular altcoins, remain in the hands of merchants, traders, and communities that deal with cryptocurrency. However, there is a way thanks to which you can become both an investor and a Bitcoin spender.
Use CryptoRecycling to improve your hodling strategy
The best way to explain CryptoRecycling is to compare it to a “spend and replace” cycle, where we spend Bitcoins we store and at the same time replenish the shortages we spent with the use of FIAT currency. In that way we circulate the funds and at the same time keep the same amount of coins we had before.
To depict it clearer, let us take a look at the example of John who is interested in purchasing a new Office package. The one-time purchase of Home & Student variant costs approximately €150. However, instead of buying it with our FIAT currency, we can use Bitcoins that we store. Once we make a purchase, we can now buy the amount of BTC we just spent on the Office with our FIAT currency. In that way, we managed to spend BTC and at the same time remain a hodler.
It applies to other altcoins as well!
Although the example presented above may seem like an ideal solution for cryptocurrencies that were primarily created as an alternative payment method, it is also possible to use this technique with coins that are not used in that way.
A good example is XRP. It is a digital asset with the attention to be used by financial institutions. Since most of the giant companies haven’t accepted it yet, its value remains low. Still, it doesn’t bother hodlers to keep the currency and wait for big companies to step in and raise its value. Unfortunately, in that way we block its progress and we decrease the speed of its possible technological adoption.
Summary and conclusion
As you can see, CryptoRecycling is a great idea for all coins there are. It doesn’t matter whether an altcoin was primarily designed as a payment method or to any other agenda. We just need to bear in mind that we can still hodl and take an active part in the development of the cryptocurrency world.
We just need to make sure that we apply “spend and replace” methodology, so we will:
- Keep our investment;
- Unlock the cryptocurrency flow;
- Support the development of the crypto world.