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When to sell cryptocurrencies
When you should sell cryptocurrencies
There are generally four occasions when you should consider selling your cryptocurrencies, regardless of what the hodlers say:
- There is a lack of development in the project behind blockchain and cryptocurrency.
- When you feel you have earned enough and can invest the money in safer investments.
- There is a long series of negative news about the projects you have chosen.
- You want to reallocate your funds.
While many people believe that the best way to invest in the cryptocurrency market is hodling, there are those who challenge the market and sell when they feel the time is right. But how do you know when to sell cryptocurrencies? This guide discusses some cryptocurrency basics to look for and some of the best times to sell.
Key points
- Investing fundamentals also apply to cryptocurrency.
- You may want to sell your cryptocurrencies in some specific circumstances.
- If there is a lack of progress in blockchain development or a series of negative news occurs, you may want to sell your cryptocurrency.
- If you have reached your investment goals or want to reallocate your holding, you may want to sell your cryptocurrency.
Cryptocurrency Fundamentals
The cryptocurrency market is not like the stock market, where if you invest in a good business, you are bound to see its shares rise over time. There may be short-term ups and downs in the stock market, but a strong business fundamentals always prevails.
This also applies to cryptocurrencies. Some of the important fundamentals for investing in cryptocurrency are:
- The team behind a project: The team must be experienced, dedicated and organized. They should be credible and you should be able to read about their achievements and past projects.
- The real-world application and potential of the project: There should always be an intent for a cryptocurrency and a blockchain. A cryptocurrency with no goal guiding it other than to be a cryptocurrency in hopes of appreciating value has no value.
- Application for the application of blockchain and cryptocurrency: The mission and vision for the blockchain and the cryptocurrency should be workable and understandable, and the project should address real-world problems. This will stimulate demand more than just being another cryptocurrency.
- The technology behind the project: Find out if there is anything different that distinguishes a cryptocurrency and a blockchain. It could be designed completely differently or use new methods – a “new” blockchain and cryptocurrency that does the same thing as thousands of others just adds to the list of imitators.
Examples of differences
Bitcoin it is the leading asset on the market. Its original design was intended to be a payment method. Developers have worked tirelessly to give it more features, with good results for the blockchain, but in the end, the only thing that keeps its price rising is the hype and hope about its price.
Ethereum, however, was created with the intent of becoming a distributed virtual machine. Like Bitcoin, constant improvements are being made; however, many developers use Ethereum and similar projects to develop the emerging Web3.
The open source XRP Ledger and its native token, XRP, are used by the Ripple company to provide payment services to banks, financial institutions and businesses. This may or may not make XRP an investment worth buying, but it provides insight into how the XRP cryptocurrency is used and some of its potential.
Specific situations
The following sections cover some situations where you may want to sell the cryptocurrency you hold. These are not hard and fast rules and you should do your research and exercise caution, but they are definitely worth keeping in mind.
If there has been a lack of progress in development
Sometimes, you’ll see that a cryptocurrency project and its associated token are off to a great start, making ambitious promises. The token performs well and rapidly increases in value, only to slowly lose in price over the course of weeks or months. This steady decline in value sometimes happens because a project simply isn’t making enough progress in development.
Crypto teams are still building products. If these products don’t come to fruition, investors will quickly notice. That’s why teams place such importance on transparency and offering regular updates. Without such communication, it is reasonable to assume that the team is not achieving its development goals, and this is a sign that you may want to sell.
If you have earned a substantial amount
On the other hand, if you have made a considerable sum from your cryptocurrency purchase (let’s say the asset has doubled from its initial price) then this could also be a selling opportunity. The project may very well continue on an uptrend with strong growth, development and market position, but a trader may want to take existing gains.
This decision is up to you. If you want to cash in and reallocate your capital, then this could be a good move. Otherwise, you can simply hold on to the holdings if you believe the project has solid fundamentals.
You want to reallocate your funds
If you have experienced strong returns or losses on a purchase, you may consider selling the asset to reallocate funds, cash out, or reduce losses. Many traders do this, as more often than not you will find that your assets are in red.
Taking all your holdings and putting them into another project could allow you to recover from a loss or capitalize on another promising asset. But remember, none of this is guaranteed, so you need to be confident in your decision. If you feel like you’ve invested in a good project, stick with it and don’t reallocate funds willy-nilly.
A series of negative news
The cryptocurrency market lives and dies by the news cycle. While this also applies to the stock market, cryptocurrencies are much more influenced by what happens in the media. Considering the transparency of everything and the fact that influencers can have a big impact, it’s no surprise that cryptocurrencies can move up and down double digits because of the titles.
Every now and then you will see a series of negative news related to a particular project and the token will subsequently fail. It’s important to keep your finger on the pulse of the market and this can give you a very strong idea of where a project is going.
For example, the Collapse of TerraUSD I have seen a number of negative incidents. As the token began to rapidly collapse, many investors cashed in MOON before some of the later developments. It will be impossible to time this perfectly, but it’s really helpful to keep in mind as you trade.
How can I sell my cryptocurrencies?
The easiest way to sell your cryptocurrency is on a reputable, regulated exchange like Coinbase, Gemini, or Binance.
How can I sell my cryptocurrencies for cash?
In most cases, you need to have an account on an exchange. Some exchanges may require you to link a bank account. You will need to provide personal information so that the exchange can identify you and sell your cryptocurrencies to the exchange. The exchange will forward the funds to your exchange account or bank account.
How can I cash out my Bitcoin to my debit card?
You will need to have an account on an exchange, which includes providing your personal information. You can sell your Bitcoin to or on the exchange and receive the funds in your exchange account, which you can then withdraw to your bank account.
The bottom line
The cryptocurrency market is capricious and even the most experienced investors encounter negative episodes. The focus should be consistent and a solid investment rubric, which can help limit any losses. That said, it is not true that the cryptocurrency market has hard and fast rules that will allow you to navigate smoothly.
The above guidelines will help you navigate the tricky waters of cryptocurrencies. They in no way guarantee success, but they are effective pointers that will help you move forward. Basic investment rules still apply: never invest more than you can afford to lose, and always conduct thorough research.
The comments, opinions and analyzes expressed on Investopedia are for informational purposes only. Read ours warranty and exclusion of liability for more information. As of the date this article was written, the author does not own cryptocurrency.