If you have already purchased cryptocurrency, be it bitcoin or any of the other famed tokens in the crypto world, knowing when to dump your cryptocurrency, reap your profits, and/or reinvest your investment is essential.
Ideally, the best time to invest in a cryptocurrency is when it is nice and cheap. Play the waiting game, and pull the plug when its price has risen substantially. If you want to buy a cryptocurrency that has already made its name in the market, and is not cheap anymore, the best time to invest in the token is today, as its price may rise at any time, the very nature of cryptocurrencies being volatile.
To put it into perspective, the Stratis coin was released into the market on the 12th of August, 2016. If you had invested $3,000 initially, to buy 300,000 Stratis at $0.01, you would have earned a profit of over $4.2 million if you sold your coins in January, 2018, the price of the coin being $14 at the time. The price of the currency is now lower and hovers around $0.346, which is still massive if you consider how much the coin was worth in August, 2016.
When having a long term investment vision in mind, cash out 20-30% from your profits when and if you need to. Analysing the growth rate of the market, the potential of the project and future ambitions is necessary when it comes to buying and eventually selling a cryptocurrency. After performing due diligence for the same, aim for a return rate of 10-100 times of what you invested. Make use of popular apps like CoinCap, Blockfolio, Coinfolio, Crypto News to track your profits and monitor price movements.
Shrewd investors play the waiting game when everyone else is buying, and buy only when everyone else is selling. The cryptocurrency market still being an emerging one, transactional highs or lows can greatly impact the price of a coin. To put it into perspective, buying or selling $500 million bitcoins will create a huge disarray in the market and lead to it crashing, while more established markets like the stock and gold market will not flinch in due course of such a transaction.
There may come a time when investors buy tokens in large amounts, leading to a rise in its demand, eventually leading to its price going up. You may risk overpaying in such a situation and you must refrain from the same. The same applies for selling. If you see a sudden rise in the price of a coin with or without any major update or cause for the same, you can cash out, provided you have analysed the market and feel little-to-no potential for further growth.
Holding on to your investment keeping in mind the future and a long term strategy will hold you in good stead. This is the best practise for amateur traders. However, if you decide to hodl, be careful where you execute your trades. According to an article, cryptocurrency trading brokers, published by the TradingBeasts website, most brokers charge an overnight fee which makes long-term holding close to impossible. It is therefore advised for long-term investors to trade on platforms which do not have this fee.
Seasoned traders try to reinvest money obtained from profits into another coin, but this is not advised to those newly venturing into the cryptocurrency sphere. There are several people who sold their bitcoins when it outrageously dipped to $3,689 on the 18th of December, 2018. There are also a group of people who sold their bitcoins when it reached its peak price of $19,783 on the 17th of December, 2017. The former played it wrong, while the latter made a wise move. While the price of bitcoin may usurp its peak price so far in the future, hodling is better than selling when prices plummet.
Most altcoins are pegged to Bitcoin in a closer manner, than were Asian currencies to the US Dollar during the Asian Financial crisis! If you are investing in Bitcoin, the price of altcoins may go down if the price of Bitcoin rises drastically. Many people tend to ride the upward wave of Bitcoin’s rise in price in this case, and exit the scheme of investing in altcoins. Similarly, if the price of Bitcoin falls, people tend to exit investing in altcoins – switching to fiat currencies. As the price of Bitcoin depends on its demand, the best time to invest in altcoins is when Bitcoin shows organic growth, or decline, or tends to remain stagnant in its price. This is when altcoins generally grow in price and stature, and you could dump your cryptocurrency when it reaches a substantial price, sometime within this frame of time.
You may come across several projects which may seem to be too good to be true – refrain from them. Believe in investing keeping a long term goal in mind and perform your due diligence before buying into a project. Cashing out when a token is on a high may seem like a good strategy, but try keeping your investment for a long duration of time, cashing out 20-30% of the profits acquired from time to time if necessary. Being brave and playing it safe are both important and essential, as and when the time for the same comes about.
About the author:
Michael Kuchar is a cryptocurrency and forex trader who has a deep passion for blockchain technology. He focuses primarily on intraday trading. He is also a popular blogger and analytic for various cryptocurrency and investing related websites.
Image courtesy of Crypto Vest