Chainalysis – a commonly used blockchain data company – recently invested in an unspecified amount of Bitcoin. The investment comes as Bitcoin's price creeps ever closer to all-time highs and surpasses its market cap record from May. Chainalysis Plans to HODL The data provider announced its latest investment in a blog post today and simultaneously confirmed a new partnership with NYDIG. NYDIG is a Fintech service provider for banks, corporations, and institutions. The financial company has allowed Chainalysis to add…
Most experienced traders will agree that there are times when it makes more sense to sell your Bitcoin (BTC) or altcoins rather than take the brunt of losses head-on. Importantly, there is no specific point of buying or selling cryptocurrencies that is “right.” Every investor’s situation, overall goal, and investment strategy varies greatly. For these reasons, it can be notoriously difficult to determine when it’s best to sell your digital assets.
Greed Gets You Nowhere
The main thing to understand is not to be greedy in your approach. FOMO (fear of missing out) is a real concern for new investors. Many of these investors have already secured healthy profits from their investments to date. The prospect of even more profits can make it difficult to exit the market for these participants. However, it’s exactly this attitude that can erase any ROI you secured to date.
Is HODLing Smart?
It’s crucial to mention at this point that there are times when it makes sense to hodl (hold on for dear life). This strategy is best for non-active traders who have faith in the long term direction of the projects they invested in. In the Bitcoin sphere, this is a very popular strategy. There are also altcoin projects, such as Ethereum, that have gained respect in the market.
However, it’s vital to understand that Bitcoin serves a different purpose than most cryptos. Also, it holds a solidified position in the market. It’s not guaranteed, but it’s a safer bet to assume that Bitcoin will still be in use in the next ten years. The same cannot be said for the majority of altcoin projects in the space. For these reasons, you need to be pickier on which altcoins you decide to hodl.
Sales Strategies That Work Across All Cryptocurrencies
Investors use some strategies to determine when it’s best to sell their holdings, regardless of whether they are Bitcoin or altcoins. Notably, when you sell your coins, it’s not a permanent maneuver. In most instances, this will represent the closing of your investment position. Most investors will then reconsider the market’s direction and reinvest when they feel it’s profitable again.
Set a Sales Target
One of the best ways to lock your profits is to set a target price to sell at. In this strategy, you set a sales target when you buy the coin. For example, let’s say you purchased ATOM at $4.50 with a target price of $5.50. Once the target is reached, you sell your coins and secure your profit. Using the limit sell option is one of the best ways to ensure you sell at your sales target. Most investors will then take a day to rethink their approach and reevaluate the market before taking up new positions.
Another popular strategy used by savvy crypto investors is to lock in profits gradually. In this scenario, users cash out some of their profits in small increments. For example, an investor could choose to sell 5% or 10% of their total tokens. They could then leave the remaining balance in the market. The remaining coins will help the investor to judge their decision. Additionally, it reduces their risk exposure and leaves some profits to be made if the coin’s value increases.
After Market Value Rise
Another great time to sell your digital assets is following large value gains. Yale researchers studied the price movements of major cryptocurrencies for weeks and discovered some interesting facts. The researchers concluded that the best risk-free time for trading digital coins is the week directly following a sudden increase in prices of more than 20%.
One of the ways professionals determine when to sell their holdings is via technical indicators. Traders use various tools to help predict future market movements. While no one can say what the market will do next with 100% accuracy, technical indicators allow professional traders to make educated guesses with ore accuracy.
For example, the Relative Strength Index (RSI) is a momentum oscillator that measures price movements’ speed and change. This tool can help an investor to determine if an asset is over or under bought. Overbought assets have more supply than demand. When an asset is overbought, there is a great chance that it will see a price correction. Keenly, this is just an indicator, and there are many times in which the asset continues to gain value. It would help if you always utilized multiple technical indicators to improve your results.
There are outside factors that affect the price of cryptocurrencies negatively, as well. One such concern is regulatory concerns. Changes in regulations can signal a market drop is imminent. A perfect example of this played out in 2017 when China closed all local exchanges and banned ICOs. The news sent shockwaves through the market and dropped crypto values by almost 20% for weeks.
While it may be difficult for you to know what your local regulators have planned fully, it’s easier to feel the atmosphere. If you live in a region where you notice the media and officials’ view on cryptocurrencies is negative, you need to be prepared for this scenario to play out. In many instances, these regulatory issues are temporary as regulators scramble to understand the new technology and its effects on their control structure, the market, and citizens.
Strengthen Your Position
One of the best reasons to sell your crypto is to get more crypto. Savvy investors sell their assets before or at the start of major market corrections and then buy back in once they determine the dip is at its lowest point. Notably, buying on the dip can be difficult. You will need a firm understanding of the market conditions to prevent buying while the market continues to crash. Regardless, if you sold at the right time, you are still in for some free crypto when you reenter the market.
When to Sell Your Altcoins
Altcoins carry an additional risk of inflation versus Bitcoin. There are thousands of these projects in the market. Many of these coins are fueled purely by speculative investors. This situation leaves many altcoins susceptible to run off sales. For these reasons, you need to be vigilant in your altcoin investment assessments.
Rank your coins based on their risk. Smaller projects that are not open source and projects with no functioning platform should be ranked highest in terms of risk exposure. These are the coins and tokens you need to pay extra attention to when the market starts to drop. There are plenty of horror stories of investors losing their entire holdings due to the complete collapse of a platform.
When to Sell Your Bitcoin
Deciding when to sell your Bitcoin is a bit trickier. Unlike most altcoins, Bitcoin exhibits many long term investment characteristics. The scarcity and continued adoption of this crypto make it unique in the market. Most investors will put aside a specific amount of their Bitcoin holdings for trading and hodl the rest. This approach gives you a little more balance and ensures you remain balanced.
When is The Right Time to Sell Your Bitcoin and Altcoins
Now that you better understand when it’s best to sell your Bitcoin and altcoins, you are ready to put your strategy to the test. Remember, you will need to monitor the market and outside factors that play a role in crypto pricing. You are sure to see higher ROIs once you master how to avoid market downturns and how to strengthen your position.