It refers to a person that’s holding (instead of selling) a crypto-coin that is losing its value for good.
Some reasons this could occur include a simple inattention to one’s portfolio of cryptocurrencies, or an unwillingness to admit one was wrong about a purchase. One explanation for bag holding is the “disposition effect”, whereby investors tend to dislike taking a loss more than they enjoy making a gain.
Another explanation for bag holding is the “sunk cost fallacy”. A sunk cost is a cost that has already occurred and isn’t believed to be recoverable. And some of the reason is simply down to hope. The bag holder continues to hope that the cryptocurrency will recover its value, and that a loss will not have to be taken.
With over 1,000 cryptocurrencies in existence, and more being released weekly, there are plenty of opportunities to be a bagholder. In fact, even Vitalik Buterin, the creator of Ethereum, has said that “90% ERC20-tokens on CoinMarketCap [are] completely worthless,”