Crypto exit strategy: When should you sell cryptocurrency?
Cryptocurrencies are very volatile, and you can make a high profit in a short period of time. However, the profit can quickly disappear when the price collapses. In this article, I will explore when you should sell your crypto (Bitcoin) to maximize your returns.
Is it wise to sell cryptocurrency?
Not everyone is willing to sell their crypto. Some investors are part of the HODL team and only buy more crypto. They believe that crypto has a future and that the price will only go up in the long run.
However, the road to success is never straight. Cryptocurrencies like Bitcoin are highly volatile, and you can lose a significant amount of money in a short time. By selling (part of) your crypto regularly, you can potentially achieve better results.
However, do not forget that timing the market is almost impossible. The crypto market is even more volatile than the stock market, making it even more difficult to predict the future.
When can it be wise to sell crypto?
After a significant increase in price
Crypto is volatile: the price can sometimes double or triple in a short period of time. It can be wise to sell at least some of your crypto in order to secure a portion of your profits in case the price drops again.
In the financial markets, you will rarely see prices only moving upwards. Especially after a significant increase, some investors will want to secure their profits. It can then be a smart idea to sell a portion and possibly buy back later.
Better alternative investments
Another good reason to sell crypto is when you believe you can achieve a higher return elsewhere.
Investors already do this all the time. When interest rates rise, for example, more investors choose bonds and savings accounts as they yield more again.
Therefore, stay sharp and look for alternative (crypto) investments. Another investment may bring you a higher return in the long run.
Lack of developments
If you do not see enough progress within the crypto, you can also choose to sell your crypto. When the development team stops releasing updates, this is a clear red flag.
A crypto will ultimately only be successful if it continues to be developed. When this development stops, it can be wise to sell the crypto.
On bad news that can lead to a crash
When a lot of bad news comes out about crypto, there is a strong chance that the price will drop significantly. It may then be wise to sell your crypto.
Note: always check the source of a message about your crypto coins. If you read about a possible crash on an unreliable website, you generally don’t have to worry.
After a crash, it can be very interesting to buy again. There is then enough room for growth and this can attract new buyers. It is important, however, that the problems are structurally solved.
Sometimes you see that the entire crypto market is declining. This happened, for example, with the bankruptcy of FTX. You can also respond to this by actively trading.
When should you not sell your crypto?
It is unwise to sell crypto without a substantiated reason. When the price suddenly drops significantly, you see many investors selling their crypto assets in panic.
You should always buy and sell with a reason. Most people buy when the price is high and sell when it is low. Successful investors, of course, do exactly the opposite.
What should you consider when selling your crypto?
- How much: decide for yourself how much crypto you want to sell.
- Strategy: decide what you want to do with the freed-up money.
How can you best sell your crypto?
You can easily sell your crypto at a reliable crypto exchange. In the overview below, you will find some examples of these:
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You can choose to sell your crypto all at once if you expect a significant drop in value.
In most cases, it’s less clear when or if a crypto will decrease in value. You can then use dollar cost averaging. This means selling a fixed amount of crypto periodically, such as monthly, to achieve an average selling price over your crypto.
Tip: Invest with a goal
We recommend investing with a specific goal, not just when investing in cryptocurrencies but also when investing in other financial products. Set a clear goal in advance. Have you achieved this goal? Then it’s the right time to sell your crypto.
Of course, you can adjust your investment goal in the meantime. If you set a goal that is too low simply because you didn’t expect your investment to increase in value so quickly, you can increase your goal. If you were a bit too enthusiastic in setting your goal, you can lower it a bit.
It’s important to pursue a realistic goal with your investment. Once you’ve achieved this goal, you can sell your crypto with confidence. It’s important to have a good exit strategy in place for your investment in Bitcoin, for example!