There are many reasons why you might want to sell some of your cryptocurrencies. Maybe you just bought too much at once, or maybe it’s because you lost faith in a particular coin. Whatever the reason, there are times when you should think about doing so. In fact, we’ve compiled a list of five scenarios where you should consider selling your coins. Let’s take a look at each one.
1. You Bought Too Much At Once
If you purchased more cryptocurrencies than you could afford, it makes sense to cut your losses now. If you still have funds leftover, you might consider buying another digital currency that appeals to you.
2. Your Portfolio Is Not Growing As Fast As Expected
This is probably the most common scenario. When you buy into a certain coin, price growth usually follows soon thereafter. However, if you see no signs of growth over time, it might be best to cash out and invest somewhere else.
3. A Coin Has Dropped In Value
Even though you initially thought a coin had potential, if it’s been dropping in value over time, it might make sense to sell. This includes coins that have hit new lows recently.
The value has doubled or tripled since you bought it.
If you’ve been holding onto your cryptocurrency investments for too long, you might want to consider selling now. You’ll miss out on gains, but at least you won’t lose everything if things go south.
Cryptocurrencies are notoriously volatile, meaning that one day, your digital coins could skyrocket in value, and the next day, plummet. So if you’ve held onto your investments for a while, you might want to take some profits. But don’t let that stop you from cashing out entirely. There are plenty of reasons why you should still hold onto some of your holdings. Here are six good ones.
1. Your portfolio is diversified.
You shouldn’t put all your eggs into one basket. Cryptocurrency investing requires a lot of research and patience. And even though cryptocurrencies like Bitcoin and Ethereum are extremely popular, there are dozens of others. By owning multiple cryptos, you reduce risk.
2. You’re hedging against inflation.
Inflation is the increase in prices over time. In the United States, we see it every year with the cost of living increasing. This means that buying something today is less valuable than it was 10 years ago. When you invest in a currency, you’re essentially betting on the price staying stable. If you buy a $100 bill today, it will likely be worth about $110 in five years. However, if you had purchased Bitcoins in 2010, they’d be worth around $10,000 today.
3. You’re getting exposure to blockchain technology.
Blockchain is an emerging technology that underlies cryptocurrencies such as Bitcoin. It’s also used by other companies to create their own currencies. For example, IBM created its own cryptocurrency called “Blue Money.” The idea behind this is that blockchain can help businesses track transactions more efficiently.
4. You’re taking advantage of tax benefits.
When you purchase crypto using fiat money (i.e., dollars), you get to claim capital gains taxes when you eventually decide to sell. These taxes aren’t applicable if you use cryptocurrency instead. That’s because when you spend cryptocurrency, you actually receive the equivalent amount of that specific coin.
5. You’re gaining experience.
When you first start investing, you’re learning how the market works. Over time, you’ll learn which coins are worth investing in and which aren’t. Plus, you’ll gain valuable knowledge about the industry itself.
6. You’re helping support the network.
By contributing to the development of open-source projects, you’re helping to build the future of cryptocurrencies. Not only does this mean that you’re supporting the growth of the entire industry, but it also helps ensure that these networks continue to exist.
You no longer believe in its long-term success.
Investing in cryptocurrencies is risky. Some projects look promising at the beginning, but later fall apart. We’ve seen many examples of this over the years, including Bitcoin, Ethereum, Ripple, and others. But you don’t want to lose money just because you got too excited about a project. So how do you know whether a coin is worth buying?
Here are some warning signs that might indicate that a particular cryptocurrency project could be headed toward trouble:
1. There aren’t many developers working on the project.
2. Management doesn’t seem trustworthy.
3. People are skeptical about the project’s future prospects.
4. A lot of people are talking negatively about the project.
5. Investors are losing faith in the project.
You’ve found better investment opportunities.
Cryptocurrency investors have been caught off guard by the rapid rise of newer coins like Ripple’s XRP. But you don’t have to wait around to see what happens next. There are some things you can do now to prepare yourself for the future.
When you shouldn’t sell crypto
There are no clear guidelines on how much of a cryptocurrency portfolio you should hold. This is especially true for altcoins – those digital coins that aren’t Bitcoin. Some people say never to sell, others say just wait for the price to go up again. But what do you do when it drops?
The most important thing to remember about selling crypto is that there are no hard and fast rules. You don’t want to panic-sell because the market has gone down. And if you really believe in the project, you probably won’t want to sell if the price has fallen. So why sell?
You might lose money if the price goes down, but you could make even more money if the price rebounds. For example, if you bought $10 worth of bitcoin at $3,500 and sold it today at $2,700, you’d be making a loss of around 30%. However, if you had held onto your coin and resold it at $5,000, you’d have made a profit of 50% – that’s pretty good.
If you decide to sell, consider holding off until the price has dropped to a certain level. Many cryptocurrencies drop quickly, and you don’t want the price to fall too far.
Things to consider before selling crypto
If you’re thinking about cashing out your crypto investments, here are some things you might want to consider before doing so.
1. How much will you sell?
You don’t need to sell every single coin you own. Especially if it has gone up in price. There’s no reason why you have to sell half of your coins just because you’ve sold off some of your existing portfolios. Consider whether you want to keep hold of some of those coins even though they’ve risen in value.
2. You don’t need to do this immediately.
There’s no rush to sell your coins. Don’t feel like you have to sell them now if you haven’t already. Take your time and make sure you’re ready to go ahead with the sale before making the move.
3. Tax implications
If you decide to sell your coins, you’ll likely have to pay capital gains tax. This applies to both cryptocurrencies and traditional stocks and shares. In general, capital gains tax rates apply to profits made on assets purchased at lower prices and sold at higher prices.
Investing in Cryptocurrency Stocks
The blockchain technology revolution is about to change how we invest our money. In fact, it already has. Cryptocurrencies are becoming an increasingly popular investment vehicle around the world. With Bitcoin prices reaching record highs, many people are looking into investing in cryptocurrencies like Ethereum, Litecoin, Ripple, Dash, Zcash, Monero, Dogecoin, and others.
Cryptocurrency investors typically buy coins via exchanges such as Coinbase, Binance, Bitfinex, Kraken, Poloniex, etc. Once you purchase cryptocurrency, you must decide where to store it safely. You could keep it in a wallet on your computer, use paper wallets, hardware wallets, online storage solutions, or even exchange platforms.
Once you determine what type of wallet you want to use, you need to choose one that best suits your needs. For example, do you prefer cold storage or hot storage? Cold storage refers to storing your assets offline in a physical device while hot storage refers to keeping your assets online. If you are concerned about losing access to your funds, you might opt for cold storage. However, if you are worried about hackers accessing your information, you might go with hot storage.
Another important decision you will make is whether or not you want insurance against theft or loss of your crypto holdings. This is known as custodial insurance. Some exchanges offer insurance while some don’t. When choosing an exchange, consider the level of security offered by the platform.
If you’re interested in learning more about investing in cryptocurrencies, check out Coin Central’s guide here.