Just like with trading in any other asset class, a vital part of trading crypto is learning when you should sell. Sometimes it just isn’t viable to keep buying new coins and holding on to them. The wise trader knows that it’s sometimes necessary to sell, even when everyone else is constantly buying—and that picking the right time to sell can be extremely rewarding for them.
Learning to make a good call on when to sell your cryptocurrency is admittedly not very easy. But when you become more confident about predicting the right time to sell—as well as the right amount to let go of—you’ll increase your chances of earning from your investment. You’ll also stay as liquid as you need to be, and it’ll be easier for you to make high-stakes trading decisions such as investing in another coin.
How will you be able to discern the right time to sell versus staying the course? To help inform your trading strategy, here are some telltale signs of when it’s better to sell your coins instead of buying new ones or holding on to the ones you already have. These signs apply for both popular cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), as well as altcoins like Monero (XMR) that are being held in a free XMR wallet.
You’ve Hit Your Threshold for Risk Tolerance
The number one rule of trading crypto is to never invest what you can’t afford to lose. Every crypto trader that enters the market must be acutely aware of how much risk they can tolerate and how much loss they can endure. In the context of knowing when to sell your crypto, you should be aware of when the price is close to your risk threshold.
Say for example that you are only willing to lose about 25% of what you’ve invested in your coin. That means that you should consider selling before the price of that coin dips so low that you can stand to lose 26% or more of your initial investment.
You can track your gains and losses manually, but you can also use a stop-loss trading tool to automatically sell off your coins when they’re nearing your threshold.
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There’s a Consistent Downward Trend for Your Coin
The world of cryptocurrency is a very competitive one, and there are actually more than 8,000 different coins in existence. Some coins—like Bitcoin, Ethereum, and Binance (BNB)—have long been entrenched in the market, and some even think that they are “too big to fail.”
But a new generation of altcoins, like Monero, are slowly starting to make a name for themselves. Both the storied coins and the altcoins may experience their share of the limelight in a bullish market, but all are susceptible to downward trends and sudden crashes.
Consistently bearish trends are something that you should look out for, especially if you’ve invested in an altcoin. Continuous drops in prices may signal the beginning of the end for a smaller coin, and there’s even a chance that it’ll be discontinued.
Regardless of which type of coin you have in your portfolio, keep your eyes peeled if the price dips for a prolonged period. That may be a good sign for you to sell off your coins while you are still as liquid as possible.
The Price is Just High Enough to Sell
In contrast, the opposite may also apply: it may be a good decision to sell your cryptocurrency when prices have begun to soar. You might be tempted to wait until your coin’s price is even higher so that you can sell it for more. But if you wait too long, there’s also a chance that you’ll have a harder time selling your coins at a more expensive price.
Admittedly, it takes both knowledge and discipline to be able to detect that “sweet spot” and make a timely call on when to let go of your coins. But if you learn to sell when the price is just high enough, and if you let go of any unfounded speculation of further earnings, you’ll be rewarded indeed.
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There’s Bad Press Around Your Coin
What’s interesting about cryptocurrency is that prices are just as sensitive to bad press as they are to hype. The price of your coin can fall steeply after news gets around of it being dropped from a major exchange, investors backing out on previous deals, or security threats compromising its system.
Unfavorable press can be symptomatic of deeper problems with the crypto coin, and perhaps even a sign that you should sell your remaining assets and invest in another token. If the news is particularly grave, or if the cryptocurrency always seems to be hit-and-miss (or more often, miss) with the media, consider selling your coins before they become even bigger liabilities.
Regulations Make It Difficult for You to Trade
Another factor that should inform your decision to sell is how easy it is to trade in cryptocurrency in your home country. Some governments have begun cracking down on certain cryptocurrencies, and some might be considering adding tighter regulations on crypto trading.
If you catch wind that it will be difficult to trade in crypto where you live, divest early so that you won’t have to deal with fines or other complications. You can choose to trade in a crypto that has a wider network and better support infrastructure in your country, or you can pursue other investments instead.
You’ve Gotten What You Needed Out of Your Cryptocurrency Investment
Lastly, it’s perfectly reasonable to let go of your coins if you feel like you’ve peaked and if you’ve already gotten what you needed out of the investment. To avoid subjecting yourself to unwanted risk, and to open yourself up to the possibility of investing in other coins or asset classes, give yourself a fresh start by selling your crypto.
Investment goals vary from trader to trader, and the ideal time for you to sell may not be the ideal time for another person to do the same. Base your decision on what’s right for you and what best reflects your current financial interests.
All in all, there are several factors that you should consider before deciding to sell your cryptocurrency. It really depends on the timing, the current state of the market, the technological developments of individual coins, and the trading environment in your home country among others.
If any of these factors indicate that it’s the right time, then go ahead and make the call to sell your crypto.