The term “hodl wave” was coined by Unchained Capital, which is a cryptocurrency-based financial services lending firm that has examined bitcoin’s UTXO (unspent transaction outputs) and found there was a pattern of hodling which occurred every few years.
This allowed them to conclude that there are three significant periods of bitcoin owners hanging onto their stash of bitcoins. The first time there was a hodl wave, was between 2009 and 2011, when bitcoin owners stockpiled them for the most part in expectation of their value increasing in the future.
Then, between June and December of 2011, another wave happened as the value of bitcoin leaped from $33 to $1,000. This then resulted in a massive sell-off, with investors being able to cash in and make huge amounts of money off all the coins they had saved.
So then, these waves are driven by a desire to have more of a type of cryptocurrency and the assumption that they will be worth more over time.
There are multiple reasons to be concerned over hodl waves. For example, if everyone refuses to sell any of their coins, then the amount on the market will drop and the value will increase due to their scarcity. This is good news for investors who are planning long term strategies, but can be problematic for anyone new to the market. Next, if people see that bitcoin or another cryptocurrency is dropping in value, they may not be aware of market patterns and not see the value in hodling onto their coins.
While there are times when it’s a good idea to sell off a stock or cryptocurrency, hodling is the best path for anyone who treats cryptocurrency as an investment for the future, not a quick ‘get rich’ scheme. Frankly, the time for such schemes has likely passed for bitcoin if you’re a small time investor, and it’s better to study the market and hodl waves and make informed decisions based on the patterns which are now apparent after several years of buying and selling.
