When Is The Best Time To Sell Your Bitcoin and Crypto?
Key Questions Answered
- Selling one’s crypto at the wrong time can mean a direct loss or losing out significantly on potential gains.
- Panic-selling is the worst thing one can do; if the market crashes but coin fundamentals remain unchanged, it may be unprofitable to sell off especially at a loss, as this may result in the trader missing out on future gains.
- At the same time, one should never be overly attached to a crypto project that he is unable to cut his losses even when there is something fundamentally wrong with it.
Selling your crypto. Seems simple and logical enough–buy low, sell high…right?
Not quite. This is because when it comes to trading, a lot more is at play than just logic. We’re talking about the two emotions that often sabotage traders, namely, fear and greed.
And these emotions are never logical.
Traders often find themselves buying high and selling low instead. This is often the scenario: we see a coin going higher and higher, so greed kicks in and we buy it even at a high price, for fear of missing out (FOMO).
Then when it starts coming down, fear kicks in and we sell at a loss.
So when do we actually sell?
When To Sell Crypto? Should You Sell Your Crypto?
There are several circumstances under which you can, or maybe even should, consider selling your cryptocurrency:
When the market is greedy
As the legendary investor Warren Buffet says,
“Be fearful when others are greedy, and greedy when others are fearful.”
The theory is that when the market is greedy, there is generally a sense of euphoria and everybody is buying. This sends prices skyrocketing, creating a bubble.
This is when you should be fearful of a price correction and sell, because we all know what bubbles do–they pop.
How do you know when the market is greedy? The Fear & Greed Index is a simple-to-use indicator to gauge market sentiment.
The Crypto Fear & Greed Index shows an extremely fearful market–some traders consider this to be a good buying opportunity (Source: Alternative.me)
You have made a significant profit
Because of how volatile crypto is, gains can disappear quickly. Short-term range traders usually sell after they achieve a 5% or 10% profit target.
Take at least some profits off the table as a hedge against potential losses in the future, especially if the value of your coin has doubled or tripled since you bought it; you can then reinvest your money in the same coin or another coin.
Negative coin fundamentals
If the cryptocurrency you’re considering has recently been in the news for negative reasons that affect it at a fundamental level, like the leadership, the financials, and especially the technology, it might be best to sell–never get too attached to a project for sentimental reasons.
On the other hand, a minor scandal or controversy regarding a key team member, or a one-off event like a bug or technical flaw may not have long-term adverse effect on a project’s long-term value.
It has remained stagnant for a while
One of the mistakes of traders is to get too attached to a particular crypto project.
If the price of a cryptocurrency you’re holding has been flat or slowly declining for an extended period of time, there are several possible reasons for this.
One main reason is that the project might have lost the momentum it had at the beginning, especially due to a lack of developer activity.
In this case, it might be time to sell and invest your money in a more promising project.
You should also look out for dwindling support from the project’s community, as this can be a sign that interest is waning.
How do I Buy or Sell Crypto on the Spot Market?
When NOT to sell your crypto
Two words: panic-sell.
When the whole market is crashing and prices have fallen but nothing has changed with the fundamentals of the coin you’re holding i.e. the reasons you first invested in it have not changed and you still think it has long-term potential, you should resist panic-selling.
A fall in price should never be the only reason you sell, because what goes down will always come back up–if it’s a legit asset. If you can avoid panic-selling, you will stand to reap handsome profits when the market bounces back.
What are some crypto selling strategies?
There are 2 main strategies that you can use when selling crypto, and which one you choose will likely depend on your goals and preferences.
1. Selling all at once
This strategy involves selling all of your crypto holdings at once, in order to cash out as quickly as possible. This is often done using a when the market is trending downwards and you want to minimize your losses or maximize your profits.
Some crypto advocates are strongly against selling any Bitcoin.
2. Selling gradually
This strategy involves selling your crypto holdings a little bit at a time, rather than all at once. This can help you maximize your profits if the market suddenly reverses and starts trending upwards, as you can sell each unit of crypto for more than the last.
This is less risky than the first strategy, but obviously it also means that your gains are lesser, because if the market continues to go down, each time you sell, your gains become smaller.
For both of these selling strategies, traders can use the stop-loss order or limit order.
Short-selling is the act of selling a crypto that is depreciating, so that you can buy it back later at a lower price. You can combine this approach with either of the above two strategies–selling it all at once and buying it all back later, or selling a little and buying it back at a cheaper price later.
How to Short Bitcoin? Bitcoin Shorting Explained – Phemex Academy
3 useful technical indicators to identify when to sell crypto
While traders have possibly several dozens, if not hundreds, of technical indicators to help determine when is the best time to sell their crypto. This is important, because if you sell too early, you might miss out on potential gains. Sell it too late and you might incur more losses than you should.
Here are 3 of the most popular indicators to help you time your sale:
1. Moving Average Convergence Divergence (MACD)
This is a trend-following indicator that measures the difference between two moving averages. The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA.
The MACD line is the difference between the MACD line and the signal line. The signal line is a nine-day EMA of the MACD line.
While a buy signal is generated when the MACD line crosses above the signal line, a sell signal is generated when the MACD line crosses below the signal line, and can be used to identify the right selling opportunity.
2. Relative Strength Index (RSI)
The RSI is a momentum indicator that is used to help determine when a currency is overbought or oversold.
The RSI ranges from 0 to 100. A reading above 70 indicates that the price is overbought, while a reading below 30 indicates that the price is oversold. A reading above 80 or below 20 is considered to be extreme.
An overbought asset tends to be trading above its fair value and as such, there’s an expectation that the market will see a correction in the price in the near term.
As such, it can be used to time your exit / sell-off.
3. Bollinger Bands
Bollinger Bands are a volatility indicator that is used to measure how far the price is from the moving average. The Bollinger Bands are calculated by taking the 20-day moving average and adding/subtracting two standard deviations. This gives you an upper and lower range that the price is expected to stay within.
When the price breaks out of the Bollinger Bands, it is an indication that there is a change in volatility, and the price is expected to continue moving in that direction.
If you are looking to sell cryptocurrency, wait for the price to break out of the Bollinger Bands, then sell when the price retraces back to the moving average.
The Bollinger Bands can also be used to help you determine when to buy cryptocurrency. When the price is at the lower Bollinger Band, it is considered to be oversold, and you may want to buy. When the price is at the upper Bollinger Band, it is considered to be overbought, and you may want to sell.
Remember, the Bollinger Bands are a volatility indicator and not a price predictor. Use them in conjunction with other indicators to help you make informed decisions about when to buy and sell cryptocurrency.
How To Sell Cryptocurrency
- Find a cryptocurrency exchange. The first step is to find a cryptocurrency exchange; most trading nowadays happens on centralized exchanges such as Phemex. One key consideration for choosing a crypto exchange is the trading fees.
Phemex, with its 0.1% spot trading fees for both maker and taker, offers one of the lowest fees in the industry.
- Create an account and verify it. You will then need to create an account and verify it. This KYC process can vary depending on the exchange. Some exchanges will require you to verify your identity by providing more detailed personal information, while others may just ask for an email address.
Once your account is verified, you will need to link it to a funding source. This is usually done by providing your bank account information or your credit/debit card details.
- Deposit your crypto. After your account has been verified, you will need to deposit your crypto. Most exchanges will require you to deposit to a specific address. This address will be generated by the exchange and can be found in your account dashboard. Once you have deposited your crypto, it will usually take a few minutes for the transaction to be processed.
- Place your sell order. Once your crypto has been deposited, you will be able to place your sell order. Make sure to enter the correct information, such as the amount of crypto you want to sell and the price you want to sell at.
- Withdraw your funds. After your sell order has been filled, you will be able to withdraw your funds. The withdrawal process can vary depending on the exchange. Some exchanges will allow you to withdraw fiat currency directly to your bank account, while others will require you to withdraw crypto first (in the stablecoin the crypto you sold was pegged to) and then convert it to fiat currency.