When You Should Sell Crypto
There are generally four occasions when you should consider selling your crypto, regardless of what the hodlers say:
- There is a lack of development in the project behind the blockchain and cryptocurrency.
- When you feel you have gained enough and can put the money in safer investments.
- There is a long streak of negative news about your chosen projects.
- You want to reallocate your funds.
While many people believe that the best way to go about investing in the crypto market is hodling, there are those who brave the market and sell when they feel the time is right. But how do you know when to sell crypto? This guide discusses some cryptocurrency fundamentals to look for and some of the best times to sell.
Key Takeaways
- Investing fundamentals also apply to cryptocurrency.
- You might want to sell your crypto under some specific circ*mstances.
- If there is a lack of blockchain development progress or a string of negative news, you might want to sell your cryptocurrency.
- If you've reached your investing goals or want to reallocate your holding, you might want to sell your cryptocurrency.
Cryptocurrency Fundamentals
The crypto market is not like the stock market, where if you invest in a good business, you're bound to see its stock increase over time. There may be short-term ups and downs in the stock market, but a business with strong fundamentals always prevails.
This is true of cryptocurrencies as well. Some of the important fundamentals for investing in cryptocurrency are:
- The team behind a project: The team should be experienced, dedicated, and organized. They should be credible, and you should be able to read about their accomplishments and past projects.
- The real-world application and potential of the project: There should always be an intent for a cryptocurrency and blockchain. A cryptocurrency with no goal driving it other than being a cryptocurrency in hopes of value appreciation does not have any value.
- Demand for the blockchain and cryptocurrency's application: The mission and vision for the blockchain and cryptocurrency should be achievable and understandable, and the project should address real-world problems. This will drive demand more than just being another cryptocurrency.
- Technology behind the project: Find out if there is anything different that makes a cryptocurrency and blockchain stand out. It might be designed entirely different or use new methods—a "new" blockchain and cryptocurrency that does the same thing as the thousands of others is only adding to the list of imitators.
Examples of Differences
Bitcoin is the flagship asset of the market. Its original design was to be a payment method. Developers have been working tirelessly to give it more function, with good results for the blockchain—but in the end, the only thing keeping its price rising is hype and hope about its price.
Ethereum, on the other hand, was created with the intent of becoming a distributed virtual machine. Like Bitcoin, there are constant improvements being made; however, many developers are using Ethereum and projects like it to develop the emerging Web3.
The open-source XRP Ledger and its native token, XRP, are used by the company Ripple to provide payment services for banks, financial institutions, and businesses. This may or may not make XRP an investment worth purchasing, but it provides insights into how the cryptocurrency XRP is being used and some of its potential.
Specific Situations
The following sections cover some situations when you might want to sell the crypto you hold. These are not hard-and-fast rules, and you should do your own research and exercise caution, but they are certainly worth keeping in mind.
If There Has Been a Lack of Development Progress
Sometimes, you’ll see that a cryptocurrency project and its associated token have gotten off to a great start, making ambitious promises. The token does well and quickly rises in value—only to slowly bleed in terms of price over weeks or months. This steady drop in value sometimes happens because a project simply does not make enough development progress.
Crypto teams are still building products. If these products aren’t coming to fruition, the investors will quickly see through that. That’s why teams put such an emphasis on being transparent and offering regular updates. Without such communication, it’s reasonable to assume that the team isn’t meeting its development goals, and that is a sign that you may want to sell.
If You Have Gained a Substantial Amount
On the other side of the spectrum, if you have made a substantial amount from your crypto purchase—let’s say the asset has doubled from its initial price—then this may also be an opportunity to sell. The project may very well continue on an upward trend with strong growth, development, and market position, but a trader may want to take the gains that exist.
That decision depends on you. If you want to cash in and reallocate your capital, then this might be a good move. Otherwise, you can simply sit on the holdings if you feel that the project has sound fundamentals.
You Want to Reallocate Your Funds
Whether you’ve experienced strong returns or losses on a purchase, you might want to consider selling the asset to reallocate funds—to either cash in or cut your losses. Many traders do this, as more often than not, you’ll find that your assets are in the red.
Taking whatever holdings you have and putting them into another project could allow you to bounce back from a loss or capitalize on another promising asset. But remember, none of this is guaranteed, so you have to be sure of your decision. If you feel like you’ve invested in a sound project, stick to that, and don’t reallocate funds willy-nilly.
A Spate of Negative News
The crypto market lives and dies by the news cycle. While this is also true of the stock market, cryptocurrencies are far more heavily influenced by what takes place in the media. With how transparent everything is and the fact that influencers can have a large impact, it’s unsurprising that cryptocurrencies can move up and down by double-digit figures because of headlines.
Every now and then, you’ll see a string of negative news related to a particular project—and the token subsequently tanking. It’s important to keep a finger on the pulse of the market, and this can give you a very strong sense of where a project is going.
For instance, the TerraUSD crash saw a string of negative incidents. While the token began tanking quickly, many investors cashed out their LUNA before some of the later developments. It will be impossible to time this perfectly, but it really does help to keep this in mind as you are trading.
How Do I Sell My Crypto?
The easiest way to sell your cryptocurrency is on a reputable, regulated exchange like Coinbase, Gemini, or Binance.
How Do I Sell My Crypto for Cash?
In most cases, you have to have an account on an exchange. Some exchanges might require you to link a bank account. You'll need to have provided personal information so that the exchange can identify you, and sell your crypto to the exchange. The exchange will then forward funds to your exchange account or your bank account.
How Do I Cash Out My Bitcoin to My Debit Card?
You'll need to have an account on an exchange, which includes providing your personal information. You can sell your Bitcoin to or on the exchange and receive the funds in your exchange account, which you can then withdraw to your bank account.
The Bottom Line
The crypto market is capricious, and even the most seasoned of investors run into bad episodes. The focus should be consistent and a solid rubric for investment, which can help stem any losses. That said, it’s not the case that the crypto market has strict hard-and-fast rules that will let you sail through smoothly.
The guidelines above will help you navigate the difficult waters of crypto. By no means do they guarantee success, but they are effective guideposts that will help you move forward. The basic investing rules still apply—never invest more than you can afford to lose, and always conduct thorough research.
The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimerfor more info. As of the date this article was written, the author does not own cryptocurrency.
