Because the cryptocurrency market is not subject to the same rules as the stock market, it is difficult to hack. Someone who has only ever traded stocks may find this intimidating because it has its own personality. You can see how difficult this can be for newcomers, as even experienced investors are very cautious when discussing the direction of the cryptocurrency market. There are people who defy the market and sell when they think it’s time, even though many people think asset ownership is the ideal strategy for investing in the cryptocurrency market. But how can you decide when to sell cryptocurrency to make a profit? In this article, we investigate that.
The Cryptocurrency Market is a wild beast
It is extremely important to first understand the cryptocurrency market. This is not the stock market, where if you invest in a solid company, your portfolio is guaranteed to grow over time. The stock market can experience short-term ups and downs, but a good company with solid fundamentals always wins.
This is not the case with cryptocurrency. For example, the market’s main asset, bitcoin, can drop significantly in a matter of hours or days. The reverse is also true; it is not unusual for an asset to double in value at the same time.
The main difficulty in trading cryptocurrency is this volatility. However, forecasting these decreases and increases is not an exact science. Consider the impact of all the news about the Ethereum 2.0 testnet and the increasing price of Ethereum as one of the dependable techniques to determine whether an asset will increase in value.
Despite the market’s volatility, keep in mind that many of the fundamental principles of investing in cryptocurrencies still hold true. It is nevertheless worthwhile to ride through the turbulent times if an asset appears to have a good fundamental purpose.
So, when to sell cryptocurrency to make a profit?
The cases when you may want to sell cryptocurrency you own are described in the next sections. While they are not absolute laws, and you should do your own research and exercise caution, they are nevertheless important to keep in mind.
If Development Advancement Has Not Occurred
There are times when a cryptocurrency project and corresponding token have a great start and make great demands. The token works well and shows an initial increase in value and then slowly loses value over a period of weeks or months. Sometimes a project just doesn’t make enough progress in development, resulting in a steady decline in value.
Cryptocurrency team products are still in development. If these things don’t materialize, investors will know right away. Because of this, teams emphasize transparency and providing frequent updates. Without such communication, it is safe to conclude that the team is not developing as planned, which is a red flag that you might want to sell.
If You Have Made a Significant Gain
On the other hand, if you have made a significant profit from buying a cryptocurrency – say, the asset has doubled in value since you bought it – then that might also be a good time to sell. A trader may want to take advantage of the benefits currently available, even though the project may well continue to grow because of its excellent growth, development and market position.
Your choice is ultimately up to you. This may be a wise choice if you wish to reinvest your capital and cash out. Otherwise, if you believe the project has solid foundations, you can just keep your shares.
You Want to Reallocate Your Funds
Regardless of whether your investment made a positive or negative return, you might consider selling an item to reallocate your finances and either make a profit or reduce your losses. This is what many traders do, because more often than not it leads to negative asset values.
You may be able to recover from a loss or take advantage of another attractive asset by taking everything you already have and investing it in another venture. Keep in mind, however, that nothing is guaranteed, so you must be sure of your choices. Stick to your investment in a solid project if you think it’s a good idea, and don’t reallocate money randomly.
A Scattered Negative Report
The news cycle makes or breaks the cryptocurrency market. While the stock market is also subject to it, the media has a much greater impact on cryptocurrencies. Given how open everything is and how influential influencers can be, it is not surprising that news can lead to double-digit fluctuations in cryptocurrencies.
From time to time, you may see a string of bad news about a particular project, followed by a collapse in the value of the token. It is extremely important to follow the pulse of the market, because it can help you predict the direction in which the project will evolve.
For instance, a number of unfavorable events occurred during the TerraUSD crash. Many investors cashed out their LUNA before some of the later developments, despite the token fast sinking. Although timing this properly won’t be possible, it really does help to keep this in mind when you are trading.
What is cryptocurrency?
Cryptocurrency is a type of digital currency in which, unlike a centralized body such as banks or the government, a decentralized system using cryptography is used to verify transactions and maintain records.
What is Bitcoin?
Bitcoin is a decentralized digital money that does not require a middleman to be used for purchases, sales, or exchanges. It was developed by a group of unknown developers under the name Satoshi Nakamoto, who described it as an electronic payment system based on cryptographic proof rather than faith.
How to choose crypto exchange?
Investors should choose a cryptocurrency exchange to trade cryptocurrencies. To do so, it is important to consider a number of important factors, namely safety and security, the variety of cryptocurrencies available for trading, fees, rewards and regulatory compliance.