In this guide, we’ll describe how to create a healthy, utility-based Bitcoin economy and why the “hodl” mentality is seriously flawed.
What is HODL?
Within the Bitcoin community there is a 4-letter meme, “hodl”. This mantra encourages Bitcoin users to “never spend” and “never sell” their Bitcoin. It originates from a 2013 drunken post which mistakenly misspells the word “hold.” At the time, the price of Bitcoin was crashing and the poster was attempting to calm his fellow Bitcoiners and prevent them from panic selling. While well intended, this cautionary plea for users to consider the long-term growth potential of Bitcoin ironically degenerated into a “never use Bitcoin, ever” attitude which is extremely harmful to the growth potential of the cryptocurrency.
Despite the humor of this meme, keeping a hold-only and never spend mentality for your Bitcoin stifles the adoption of Bitcoin as a currency and prevents onlookers and users alike from seeing this powerful medium-of-exchange as anything other than a speculative asset.
Hodling is nonsense and limits Bitcoin’s growth potential
Instead of hodling, the way to create an economy that fosters adoption and helps grow the network is through a spend and replace strategy.
For example, let’s look at a Bitcoin user named John who has $100 worth of Bitcoin. Using the spend and replace strategy, he:
- Spends $50 worth of BCH to buy something online
- Uses fiat currency to purchase an additional $50 worth of BCH, replenishing his holdings to the amount he began with.
With this method, John is able to both use Bitcoin and hold the currency for future gains. He is continuing to build his portfolio while using Bitcoin as the digital currency it was intended to be. This main benefit of this strategy is that it incentivizes businesses and individuals to adopt Bitcoin while helping the network grow.
In a recent talk by Swedish Pirate Party founder Rick Falkvinge, he talks about how “hodling” is detrimental to the Bitcoin economy,
“The whole idea is to grow the economy to a point where you no longer need to change cryptocurrencies back into central bank money and back again into cryptocurrency. The point was grow the economy where you receive your wages in Bitcoin, paid your rent in Bitcoin, paid your food in Bitcoin, shopped online with Bitcoin; where you no longer needed central bank money for anything where you would cut fiat entirely out of the loop. Once your only receiving new money in cryptocurrency and your using this cryptocurrency, then your on the path to a new monetary system.”
Spend and Replace: Bitcoin Recycling
Spend and replace is the way to continue building the Bitcoin economy and ecosystem. Another way think about it is by recycling. By actually using Bitcoin, you are helping to create utility. By creating utility, it will make others want to use it too.
Bottom line: spending Bitcoins creates value which increases the total price of your portfolio.
An easy way to begin recycling is to initially buy Bitcoin (BCH) with fiat currency. If you unable to buy Bitcoin (BCH) online then find a local seller or a friend to sell you some. Then if you buy something online, replace the coins you spent by buying more. You should also try to get your employer to pay your wage in Bitcoins so you can earn more. There are other ways to earn Bitcoin too, such as buying a mining contract.
We hope this guide has cleared up why stashing away Bitcoins and never spending them is not only bad for your investment in the long-term, but also bad for the Bitcoin ecosystem in the short-term.
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