When Should I Sell Bitcoin?

News | September 13, 2022, 10:00 AM | The content is supplied by a Guest author

Bitcoin and other cryptocurrencies present a new and exciting investment option. The excitement stems from its perceived potential to be a game-changer in the financial sector. However, there is also plenty of fear since it largely remains unknown for most people and quite challenging to master for the enlightened few.

The situation gets more complicated considering the usual investment concern of when to buy and sell. This article explores the nature of investing in bitcoin and shares strategies for understanding when to sell. It would be best to consider selling your bitcoin when you feel it is no longer a good investment. However, it isn’t as simple as more factors will affect your decision. Let us look into the important ones.

What’s the crypto market status?

The crypto market is more volatile than the conventional stock market. Typically, investing in a well-performing business guarantees a healthy return over time. Its performance might have dips and crests, but the trend is usually upwards. The crypto market behaves more erratically than traditional markets. For example, bitcoin, the most popular cryptocurrency, can lose its value significantly over a short period. On the other hand, it can double or even triple in value on the same day.

Such volatility is the biggest challenge in investing in cryptocurrency since there is no exact manner of determining its behavior. The crypto market is currently experiencing an influx of investors because of its novelty which makes it sensitive to market forces. It is best to consider cryptocurrency a volatile asset when investing.

When to sell crypto

You may be asking, “When should I sell my bitcoin?” Let us look at instances when it is a good idea to dispose of your crypto investment.

Once you gain healthy returns

A quick comparison of how much you have made in relation to your investment will guide you on whether the investment has been productive. For example, if your bitcoin shows a good profit, you might consider cashing out.

Naturally, you might be tempted to keep investing to make even more profits. However, the market’s volatile nature might see you lose it all. While there is a slim chance that it might be lucrative to keep investing, you need to err on the side of caution. At the very least, cash out with your initial investment intact and a satisfactory profit.

Stagnation

While it’s rare for bitcoin to stagnate in its performance, other cryptocurrencies might exhibit this behavior. Typically, new cryptocurrencies take time to gain traction in the market, while others start well. Therefore, if your chosen crypto isn’t performing as expected, save yourself the possibility of losses by selling.

Most cryptocurrency investors keenly observe performance at the infancy stages. The moment they notice a decline, they pull out and seek other, more promising options. Therefore, you need to ensure you’re not left holding a stagnated asset.

Diversification

You should never stop diversifying your investment portfolio, even when experiencing a healthy investment return. Therefore, if you’re losing, save whatever remains by putting it in another investment tool or parking the money as you strategize a comeback. Once ready, you could go to cryptorunner.com to buy your bitcoin and other cryptocurrencies securely and conveniently.

In addition, if the crypto shows great returns, sell a portion of it and put it in a less volatile investment tool. Such diversification helps you counter losses in all investment and leaves you in good standing.

Bad news

The stock market is sensitive to the news cycle, but cryptocurrency is significantly more sensitive. As an investment tool born on the internet, cryptocurrency is subject to its whims and acts accordingly. For example, an influencer might release content that persuades followers to invest in one, and the cryptocurrency’s value will increase in hours.

However, anything negative from the same influencer, or an unsavory association, will see that value plummet the next day. As such, you need to pay attention to the news cycle, especially events surrounding finance. Whenever your bitcoin gets on the news, watch how that affects its value to help you decide whether to sell.

Tips on managing your crypto investment

Here are a few tips to help you manage your crypto investment:

Set clear targets

Beyond the hype and the drama of crypto, you need to think of it like any other investment. While it is new, takes time to understand, and is still a growing market, you should be clear on what you expect out of it. Such objectivity helps to handle the bad days and keeps you focused and grounded on the good days.

Therefore, determine how much you’re comfortable investing, which coins are ideal, how much you aim to make, and when. There will be a lot of adjustments in your plans to match the realities of cryptocurrency, but such targets help steer you in the right direction. It is never a good idea to fly blind when investing.

Use a stop loss mechanism

You need a system that automatically closes crypto trading when you hit a specific low. Since cryptocurrency behaves erratically, there’s always a chance that yours might lose a significant value too fast. You’ll lose everything if you cannot manually shut down trading or cash out.

Therefore, determine what loss levels you’re prepared to bear and institute an automatic shutdown sequence. This protects your investment and gives you peace of mind knowing you won’t lose it all.

Discipline

Despite promises and expectations, determine when to sell and stick to it. As mentioned, there's always the chance that your bitcoin will double in value by the next day, which tends to encourage those losing to keep at it and those winning to keep at it even more. However, the better approach is to have some discipline in handling this investment and to be smart about it.

Conclusion

It is essential to understand when to sell your bitcoin. The crypto market is volatile, which necessitates a strategic approach. Its erratic nature means you should cash out when you realize a healthy return if it stagnates when news about its performance turns negative and for diversification to balance your portfolio. Additionally, setting clear targets and an automatic stop-loss mechanism should help curb too many losses. Such an approach should give you peace of mind as you invest in bitcoin.