Bitcoin – Should You HODL or Have a Trading System?

Hold On For Dear Life

The term “HODL,” also known as “Diamond Hands” or “buy-and-hold (BNH),” first emerged in an online cryptocurrency forum in 2013 as a misspelling of the word “hold” — a typo that readers quickly embraced. HODL, which stands for “Hold On for Dear Life,” refers to the strategy of retaining one’s digital assets, even in the face of extreme price fluctuations. Given Bitcoin’s (BTCUSD) recent bout of volatility, HODL remains relevant more than a decade later, in 2025.

However, blind faith in any financial product can be seen as a disadvantage for an investor, particularly given that Bitcoin has experienced three bear markets with declines ranging from 78% to 86% since 2011. See Figure 1 below. Nevertheless, this behavior can be a rational response to a market characterized by significant fluctuations.

If you purchased BTC in 2013 and held onto it through these three bear markets, you would now be sitting on a substantial gain of 7,335% to 665,590%, depending on when you bought it. Since the lowest price in 2013 was $13 and the highest was $ 1,163, timing your purchase is critically important. This underscores that HODL/BNH lacks a strategy due to the absence of an entry or exit plan.

Therefore, let’s compare this with active position management. In the next section, we will evaluate a long-term trading system that generates monthly BUY, SELL, and HOLD signals, allowing for the reinvestment of profits. Please refer to Table 1 below.

Compounding and Time Are the Two Critical Factors for Success

The signals from the long-term trading system are illustrated in Figure 1. Green boxes indicate when the system signaled a purchase of Bitcoin, while red boxes indicate when it signaled a sale of BTC. Since 2012, a total of five trades have been executed, with a sixth currently in progress that was initiated on February 28, 2023. See Table 1 for more details. Thus, the trading system has minimized losses and allowed profits to grow, as any effective system should.

Additionally, the trading systems successfully navigated all three bear markets, enabling investors to weather these storms with complete confidence while preserving their cash holdings. HODLers likely spent sleepless nights, biting their nails and shouting at their pets as their cortisol levels spiked. A few months after the storms passed, the long-term trading system resumed operations.

Moreover, Table 1 shows that

• Reinvesting profits, also known as compounding, is a crucial factor in achieving success. Our long-term system has generated returns ranging from 24,000 to 508,000%, depending on the re-allocation level. Meanwhile, the average Diamond Hand has since 2013 achieved ~15,000%, with the best result being a 665,590% gain and the worst result being +7,335%.
• Time in the market is essential. The longer one trades with a system and sticks with it while compounding profits, the bigger one’s returns will be. Patience and discipline pay.
• Trading systems mitigate bear markets. Nobody enjoys bear markets, where month after month, one experiences a decline in their portfolio- sometimes by as much as 90%. Having a trading system that alleviates such mental stress and anguish is essential for well-being and helps maintain long-term engagement, which in turn leads to even greater rewards.

In conclusion, the compounding trading system we use illustrates how this simple yet effective principle works. Combined with patience, discipline, and a strategy that includes well-defined entry and exit signals, it is difficult to go wrong. Jumping in and out or giving up after a few losing trades negatively impacts performance. HODL, also known as Diamond Hands, and BNH show potential on paper, presenting currently tremendous possible returns. However, without a strategy—specifically, without an exit plan and relying solely on hope—it is unlikely to generate the anticipated profits that adhering to a time-tested trading system will provide.