Picking winning bets is one thing; knowing when to sell them is a completely separate process altogether that has its own set of difficulties. Making cryptocurrency through mining is a procedure of complicated problems being decoded by powerful computers. As a result, you are able to make successful cryptocurrency transactions. Lots of cryptocurrencies utilize blockchain systems for handling and recording transactions, whereas other entities maintain and carry similar transaction details, making it a secure system for your crypto investments.
The entire value of the cryptocurrency market was around $2.04 trillion in march 2022. Currently, over 18,000+ cryptocurrencies are listed, and this number is only going to increase. Therefore, after the investment, you’d think that holding a winning cryptocurrency position is a stress-free, all-joyous occasion, but it is actually as stressful, if not more. That’s because you know that at any time the crypto price can plummet unexpectedly due to the massive volatility in the markets.
Here is a guide on knowing when to liquidate your cryptocurrency position, both when it is making money and when it is losing money.
Embrace the HODL Principle
HODL was popularized by the cryptocurrency community and simply means to “hold on for dear life.” It is a strategy for crypto investors to evade losses from the short-term volatility of cryptocurrencies. This strategy also helps in gaining returns from long-term value preference. Furthermore, HODL is less risky than trading. However, investors still need to assume the chance of altering rules and regulations and the perspective of people.
If your cryptocurrency has moved against you by 10, 20, or 30%, is it time to pack up and move on to the next trade? Or do you HODL and wait for it to come back up, at least to the price level where you bought it so that you don’t lose any money? The only flaw of the HODL principle is that it can sometimes abandon sound logical reasons to exit a trade in favor of the illogical and the sense of hope. Let’s face it, nobody wants to lose money or admit that they were wrong to invest it in something in the first place.
Investing Versus Trading
These two activities are often mistakenly thought of as being the same. Trading, however, is speculation and may even be compared to gambling. Investing, on the other hand, involves thorough research and careful calculations to minimize risk and protect investor capital. Understanding the difference between the two activities is important as it determines when you enter and exit your positions. For example, as a trader, you might sell off your crypto assets after a shorter time frame, such as the next minute, the next day, or the next week. An investor, on the other hand, buys crypto with the mindset of selling it years down the line after it has significantly appreciated in value.
Technical and Fundamental Parameters
Your decision to sell your crypto holdings can be strongly influenced by the technical or fundamental strategy that you use. Buy-and-hold crypto investors might have fundamental parameters, such as government interventions, that cause them to sell their crypto asset/s prematurely. Because of the highly volatile nature of cryptocurrencies, they can offer investors plenty of possibilities to produce long and short placements frequently. However, The Buy-and-hold crypto investors may be more secure, as they are not exposed to short-term volatility. Therefore, they can evade the potential risk of selling low.
Investors who prefer to buy and hold their cryptocurrency can benefit from exploring the options available on an OTC crypto exchange, which offers greater flexibility and provides unique investment opportunities.
Besides the high rate of return and the logic to invest, conservative crypto investors should also consider the risks of holding cryptocurrencies. The cryptocurrency rate is very volatile therefore, crypto investors may have to encounter drastic ups and downs in their assets. As a result, they are more exposed to risky investments than investments in conventional investment agencies. A technical trader, on the other hand, might unload their crypto holdings when indicators, such as moving averages and Bollinger Bands, hit specific price points.
When you can sell your crypto may also be affected by your broker’s or exchange’s restrictions. Platforms, like OKX, typically hold funds for a fixed amount of time after you deposit cash into your account. That means that, while you can use it to purchase cryptocurrencies of your choosing, you won’t be able to withdraw it until some time has passed. For this reason, avoid depositing funds that you’ll need to withdraw right away. You might find yourself locked out of the funds for a couple of days to a week.
Knowing when to sell your crypto, whether it’s at a net positive or negative, is important to maximize profits and minimize losses. Avoid being emotional when looking for the right time to exit a trade. Pay attention to logical reasons, including value proposition, rate of market adoption, and efficacy of cybersecurity protocols.