In the crypto space, the word bag refers to the coins, and tokens one is holding as part of their portfolio. Typically, the term is used to describe a significant amount of a particular cryptocurrency. There is no defined minimum, but when the value is relatively high, one could say they are holding “heavy bags” of a certain coin or token.
Investors that hold bags for long periods are often called “bagholders.” Although the term may apply to different situations, it is usually related to investors that insist on holding their bags despite the poor market performance. In other words, bagholders are HODLers that stick to their assets even if their bags experience a significant decline in value (during strong bear markets).
There are various theories that try to explain the reasons why an investor become a bagholder. On the one hand, some investors simply don’t follow what is going on in the market. Either because they have a strong belief that their bags will be valuable in the future, or because they just lack the time or interest to track the performance of their coins.
There is also a phenomenon called the disposition effect, which is likely related to the bagholders' mindset. It describes the tendency of investors to stubbornly hold their bad performing bags (hoping for a recovery), while quickly selling bags that increase in value. The disposition effect relates to the fact that humans, in general, dislike losing more than they enjoy winning - even if the final result is the same.
Tags #Blockchain #CryptoCurrency #Crypto Glossary #Exchange