Maybe you heard of this term already but to keep it simple, this is a mindset for some long time crypto holders with no intentions to sell. A more critical definition is someone who won't sell no matter how far it goes down. The Dogecoin millionaire is a perfect example, he reached millionaire status during the last bull run, and lost it during the downtrend.
To really understand this concept, first you have to understand the people in the crypto space. You have seasoned veterans who might apply diamond hands to a small portion of their portfolio, day traders who would rather die than have diamond hands and the FOMO (fear of missing out) newbies. Diamond handed people are looked at as zealots who won't abandon a bad investment no matter how fast and south it goes.
This sounds crazy, who would be interested in holding an asset just to watch it lose value? Some might defend this by cherry picking buying a vehicle as an example of a horrible financial decision, therefore crypto is better than buying a car. A horrible decision is a horrible decision, whether 1 million or a billion people are doing the same thing.
Diamond hands come with 1 special condition and it's not what you expect.......
Diamond hands should only apply to Bitcoin. The crypto market as a whole is not mature enough to ensure every coin rewards its diamond hand holders, only Bitcoin and strong lean for Ethereum. Imagine being diamond hands for BitConnect Coin, Safemoon or even Luna.
Diamond hands can only work for Bitcoin because it has the longest history, longest network uptime never shutting down so far. Diamond hands is a simple strategy, so the reasoning must be simple yet grounded in reality. The network might be slow compared to other coins but it is reliable and the mining method has reached global capacity.
That's why the best way to approach the crypto market is using it like a savings account. Put away a portion of your monthly income on a periodic basis. The space will continue to go up and down, but the main thing is the space continues to mature and smooth itself out for mass adoption.