Get the weekly summary of crypto market analysis, news, and forecasts! This Week’s Summary The crypto market ends the week at a total market capitalization of $1,165 trillion. Bitcoin is up by over 2% after a rollercoaster of a week. Ethereum decreased by almost 1% over the past seven days. XRP gained more than 15% in value this week. Almost all altcoins are trading in the green, with very few exceptions. The DeFi sector decreased the total value of protocols…
4 Signs One Should Stop Hodling
The term hodling was first coined in the most unexpected of ways. An old bitcointalk post had a user proclaim that he would hodl, a miss-spelling of hold, onto his bitcoins even when prices plummet. Admittedly, he had gobbled a fair share of whiskey before the post.
So to hodl or not to hodl, what signs show it’s time to sodl? Unfortunately, Sodl is a miss-spelling of the word sold, implying selling one’s crypto. Well, the article shall delve deep into outlining the obvious signs that it’s about time to sodl your cryptos and cut your losses.
Understanding Crypto Trading
To begin with, crypto trading isn’t exactly like traditional stock trading. The basics of a Moving Average Convergence Divergence (MACD) analysis, such as bullish markets, bearish markets, and specific line crossings, still apply. But the causes of swings are quite different in cryptos.
For instance, halving Bitcoin guarantees strong price appreciation, even when the current market situation is dire. On the other hand, without a clear purpose and having a current strong run, small altcoins are usually a result of whale pumper-dumper investors.
They fizzle out soon after the whale has met their objectives and opted out, regardless of how good the current bull run is.
So what are the signs that continued hodling may result in huge value losses?
Whale Investors Are Sodling
There’s no clearer sign that the prices are going to dip soon more obvious than this. Whale investors such as Institutional players or ultra-high net worth individuals (UHNWI) hold significant assets in any crypto they are involved in. Their actions, as a result, are carefully monitored by all market analysts.
When a huge whale begins to sell off their crypto assets, it denotes a cascading effect down the market. If other whales respond in kind, it is a sign to the market that there’s no longer continued trust in the crypto’s value creation.
Other investors who follow such activities closely, in turn, start disposing of their assets in the coin, resulting in wholesale value collapses. Continued hodling in such a scenario is very unsound business-wise.
Negative Government Policy Targeting the Crypto in Place
Even in the crypto space, governments have huge influences on asset prices. Many Governments’ anti-crypto actions highlight their view of cryptos as disruptive and threatening their legal tender sovereignty.
Besides, many governments still see cryptos as a haven for illicit money transfers thanks to all transactions’ privacy. The platform also uses a business model the government views as flawed due to its decentralization. As such, it may open court proceedings against certain cryptos.
Like the SEC filing against XRP, the native token of that blockchain experiences significant value drops in such proceedings. Despite how much appreciation the digital asset’s prices were enjoying, motivating one to continue hodling is a clear sign that one should stop holding.
Continued Security Issues
One security breach is not a cause for concern. A slight price dip may occur as the technical team solves the glitches, then it’s back to growth. It has happened to most blockchain systems in operation now. A second or third issue isn’t a cause for concern if the breaches’ period is wide, either months or years.
Unfortunately, there are many hackers and brilliant online fraudsters whose sole purpose is to find a glitch within a system and exploit it for financial gain. But if breaches occur in quick sequences, perhaps three major ones that are all related and occur within a month, it’s a serious cause for concern.
It shows that the blockchain’s technical team is having difficulty addressing the security issue. All investors, from whales to retail, will feel threatened by the potential of losing their hard-earned assets. As a result, many will start opting out, acting as another sign one should follow suit and stop holding.
The exit of key investors will result in asset values dropping. However, monitoring the technical team’s advances in solving the issue is important. If they’re successful before the mass exit of investors, continued hodling is still viable.
Sustained Bearish Market After a Record Price High
No one has to be very careful when analyzing a bearish market after a record price high. Is it just a slight pullback, or is it a sustained drop after the posted record set price?
Three tips as to how one can differentiate the two are;
- Checking up with the opinions of various renowned analysts regarding the price drops
- Observing the market reactions regarding the drops, more so that of big investors like institutions and UHMWIs
- Observing the time and rate with which the value drop has been experienced
If this is the scenario, most analysts believe the crypto has already hit its price peak and will continue to drop. Then most of the key whale investors are gloomy regarding its performance and are beginning to opt out.
To add to that, the rate of price collapse has been relatively huge and sustained for a long time, and it is no longer safe to continue holding the asset. The three tend to influence each other once the record-high price has passed.
But it is worth noting that a favorable market condition may still lead to price gains even if all these occur. They include huge dip buyers moving in, a new revolutionary upgrade launched by the blockchain, or a universal market gain across most market cryptos.
To avoid irreparable damage to their assets, knowing when to stop hodling is important. The signs listed above are not entirely exclusive but indicate a possibly sustained price drop.
It should be noted, however, that crypto trading is unique. Market conditions may suddenly change, deeming hodling a coin very lucrative when it seemed unsustainable a few days prior. A whale who made an exit and made analysts skeptical of future prices may suddenly choose to return and be replaced by an even larger one pushing up prices.