Holding on for Dear Life became a big meme in the crypto space. Along with ‘to the moon’, HODL was especially prevalent on boards when discussing Litecoin. When the markets hit extreme highs and lows, people panic or get euphoric. They wonder whether they should continue to HODL, or bail out to preserve either massive gains or salvage some cash from a big drop in price. Others, are just wondering whether they should get into buying LTC at all, or focus on Bitcoin or some other alt-coin. Well, should one hold Litecoin?
Note: Full disclosure, I do own some Litecoin. This is not investment advise, just food for thought, and how I approach putting money into this asset class. As always, do your own research, and responsibly assume and be aware of any risks in your investments.
Holding Litecoin or Nah?
When considering selling or holding, it would be a good idea to revisit why you purchased some in the first place. What was the underlying thesis? Does it still hold true? Did you even have one?
Did you buy hoping that it’d go from some lower amount to $1000 per coin? If so, why do you not think that it will hit these highs now? Is it only because your holding is currently down? Are you panicking because you’re seeing double digit percentage losses, on paper?
If you believe in the long-term viability of crypto, then, you are applying short-term thinking based on price movements. Instead of, taking a long-term view, that it may take a few years, to reach these new all-time highs. In that case, be patient.
Consider it Spent Money
One of the main reasons, that you don’t put all of your eggs in one basket, is that it can be psychologically draining. Yeah, you can lose all of your money too, but even just seeing the market price fluctuations is nerve wracking.
Whereas, investing an amount which you can afford to lose, it is easier to stay calm during periods of extreme volatility. In the crypto markets, that’s a common occurrence. Right now, as I’m writing this, LTC is down 10% from the previous 24 hours. That’s a pretty big swing, but still a blip on the radar, compared to other boom or busts this market has gone through.
A way to deal with this, is to assume that amount that you could afford to lose, will be lost. Plan for the absolute worst, let go of the fear of it happening. Truly understand that you can easily see a 50+% decline in price, on paper. We saw even worse after the 2017 bull run collapsed.
You purchased it, let it run. Take some profits, if it sees a huge upward swing. Maybe add a more during the bust times. Remember, you don’t have to HODL the entire position. You can sell off percentages and still come out way ahead, even in volatile markets.
50%+ corrections even happen in stock markets. Crypto is wayyyyyy more volatile, but during long holding periods of blue chip companies, you can expect to see the value of your holdings drop big time on paper. Go bring up a price chart of Pepsi stock, over the past 30 years. See those big drops? Compare them to where the price is today.
Understand, Litecoin is to only be a part of the total assets that you hold. A small percentage, not the entire pie chart. Total assets include your cash reserves, stocks, bonds, real estate, precious metals, etc.
Diversification, when executed properly, can absorb the complete wipeout of one position going bust. So, if a stock goes to zero, the other stocks in the portfolio will tend to drag up the returns. Meaning, the overall portfolio would be worth more, even though one company went completely bust.
That’s the key here. You want to protect your downside, but still possibly have an amount of crypto that could be lifechanging (or at least make living a bit easier), if its value does a moonshot.
It becomes so much harder to HODL, when that’s the only thing that you have a high percentage of net worth, wrapped up in.
Beyond just diversifying your investments, try to also create new streams of income, to help cushion any falls and to have a steady stream of fresh capital to invest. Being online, it is well worth considering creating websites or any other form of business, that is mostly passive.
Even making $10 a day in the background, while you go to work each day, will get you enough money each month to buy 2 LTC (at current price). Much of the work for online income streams is upfront, with more or less maintenance and expansion, on the back end.
Unwind Some of Your Position, if Overextended
You may find yourself in a spot where you don’t want to necessarily sell LTC, but real world demands, make it possible. That’s okay. It happens, it is better to gain some or lose some money on a trade, than to find yourself homeless or not being able to fix your car to get to work.
Again, reasons that you only put in an amount which you can afford to lose.
If there is a situation that comes up and you do need to unwind some or all of your position, why would you still HODL? Yes, you should probably try to come up with cash in other ways first, but if its the only resort…don’t hesitate.
Litecoin will probably still be around, when you can afford to jump back in. Plus, if you think that the future for it is bright, you can still make more money. Diversification and having a solid cash position is critical. People do this same thing in the stock market, tying up all of their capital in shares of stock, and not having enough cash on hand when it is needed.
Obviously, whether or not you decide to hold LTC, is entirely up to you. You need to examine your own situation and determine what is best. Yes, I know it is tough to read about how other people are making insane sums of money or are dedicated to HODL, regardless of price. Keep in mind though, their situation is entirely different, from what you find yourself in.