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@ bryan
2025-01-27 23:10:39
HODL has been defined by many as an acronym for “Hold on for Dear Life.” Many my age were taught to earn money and save it for the future as conventional wisdom. That wisdom would have you holding something designed to degrade in value at a rate of 2% annually. If all “goes to plan,” the purchasing power (value) of your savings in 35 years will be half that of today. In 2022 the US dollar value degraded a total of 8%. At this rate, your savings’ value will cut in half in less than nine years. Not quite the retirement plan one would hope for, but happens to be what my generation was taught in school. Thankfully there is a solution: become a HODLer of assets.
Every investor is a collector of assets. They all have their own thesis about the assets they collect and how the collection will transport their monetary value across space and time. My thesis is that when you hold assets (the practice of HODLing) you hold the superposition in the market and can make better decisions against the overall economic tide. I like to hold a diverse portfolio across asset types, themes, and tax treatments, so that I am always in a superposition when liquidity is needed for the next opportunity. In the words of Charles Darwin, ***“it is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”***
### The Superposition of Markets
A superposition is a phenomenon observed in nature where something is in one of two antithetical positions, both equally likely, and is only defined when observed or measured. Most have heard of the Schrödinger’s Cat thought experiment; this is an example of superposition (references below). The financial markets act as a measuring tool identifying the next entangled pair of buyer and seller. Therefore, as a HODLer you remain in a superposition within the market until either your buy price or sell price is realized, instantaneously identifying your entangled counterpart within the market. To hold assets puts the HODLer in a superposition within the markets in which they HODL.
### Making a Market: It Only Takes Two
A market is made when two parties, a buyer and a seller, come to an agreement to transfer personal property between each other. Without an agreement, there is no market activity and therefore no market. There are many more participants that help to facilitate markets like stock exchanges, store fronts, and Craigslist to name a few. This infrastructure has not changed the necessities to make a market but instead acts as a courier of information, often referred to as data. Knowing what a group of sellers are willing to take in exchange for their property, and knowing what a group of buyers are willing to pay, allows for the mapping of the market’s superpositions (known as an order book). HODLers remain in a superposition except at the moment when a market is made, identifying the two parties involved and the respective roles each will play out.
### HODLers are Not Market Participants
They have in fact shown to be previous market participants and willing to fill at least one side of the transaction. However, if you’re HODLing, you are neither a seller nor a buyer and thus not in the market. Rather, you are both a buyer and a seller that has not been realized yet. We all have our buy price and our sell price of the assets we own. However, the market may have not dropped to the point where you are willing to buy again, nor has it risen to the level in which you are prepared to sell. You are but a ‘HODLer-in-waiting’ with two potential states; you are a potential buyer and a potential seller, waiting to be measured, thus identifying and filling your market role as dictated by the market and your need for access to liquidity.
### HODLing: An Investment Strategy Built Upon Superpositions
Due to many market forces, successful investors do not simply stack cash for retirement, they are buying assets. As Robert Kiyosaki explains in his book, Rich Dad Poor Dad, **“An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket.”** Investors are buying assets in hopes that their portfolio will ferry their purchasing power, today’s monetary value, across space and time. Why HODL something that is planned to lose value for any longer than necessary?
HODLing can feel like a rollercoaster at times with the need to “hold on for dear life.” Markets are unpredictable and (as an ex-manager of mine used to say) they will always do what f@&ks the most amount of people. Combat this with conviction in your purchase decisions. Conviction on where you think the price of the asset will go and in how much time. If you start by finding and choosing your long-term savings vehicle, many will call this money, asset purchases on your way to retirement become easier as you are not battling inflation, aka planned degradation of your hard-earned dollars. What you HODL matters.