Altcoins: How to tell when to sell
Note that this is a shortened version of our recent blog post which you can find here.
So you have stumbled across another hot altcoin. We will give you the benefit of the doubt and assume that you have done your due diligence when it comes to making sure that the project you invested in is actually legit. This post is going to help you guesstimate when the best time will be to sell your asset.
This fundamentally boils down to 4 simple factors:
- Accept that it will not be bigger than Bitcoin
The first thing you need to do is whip out a calculator, look at the total supply of your cryptocurrency, and then see what price each token would need to be for the market cap of your cryptocurrency to be the same size as Bitcoin. This is a price that it is not going to reach any time soon, so if you see someone calling for your altcoin to reach 1000$ per coin when it has a supply of 100 billion, tell them they calmly and politely that they are being unrealistic.
2. Compare it to the other top 5–10 cryptocurrencies
The second thing you need to do is ask yourself: is this altcoin really going to dethrone Ethereum? A cryptocurrency which runs all of DeFi as well as thousands of other cryptos, some of which are in the top 100? Is it really going to be bigger than Tether, the asset against which most of the trading happens in crypto? This will require some research, so dig deep into the top competitors and see if yours has a chance of actually being better. (Disclaimer: it probably won’t be).
3. Realize that price expectations will depend on the price of Bitcoin
There are a lot of predictions about the price of Bitcoin, with many people looking to a 100 000k price point in the next few years. Let us be a bit conservative and say it will do a 5x from its current price to 50k in the next 1–2 years. Now assume that the other large cap coins will perform similarly, and redo the calculations in steps 1–2. You might be pleasantly surprised to find that a 50x-100x isn’t so unrealistic after all!
4. Note the distribution of the total supply
This final one may not apply depending on the altcoin you invested in, but it will apply to most of them, especially more recent projects. There is a tendency for the founders, advisors, development team etc. to receive an enormous allocation of the initial supply of any given cryptocurrency. They will most likely begin selling when the price starts to rise, which could potentially keep it from rising higher due to the flood in supply to meet the high demand. When in doubt, check out Messari or ICODrops to get a sense of where all those tokens went so you aren’t left holding the bags at the end!
