When Should You Buy and Sell Crypto?
Cryptocurrency trading and investments can give you windfall gains one day. However, at the same time, your losses may also drop significantly at any time. This fluctuation is what makes crypto trading exciting for traders. Read on if you are looking for an answer to the question, “When should you buy and sell crypto?”
Any individual with a rudimentary knowledge of investment strategies will say that the golden rule of investment is ‘Buy Low and Sell High.’ If only investment in stocks, bullion, forex, or crypto was this easy, everyone would have been millionaires. However, things are different in the practical realm, especially with the volatility of crypto assets.
Hence people have all sorts of questions and doubts about crypto trading. New investors ask one common question, Can I buy crypto and sell in the same day? Nothing stops you from buying cryptos and selling them the same day. However, it will be better to evaluate whether you gain anything from doing so, for which you require some basic understanding of crypto trading. Below is a deep exploration into the intriguing crypto investment journey, which will help find answers to many questions, including ‘When should you buy and sell crypto?’
When Should You Buy And Sell Crypto?
Pondering over the buy-low-sell-high golden rule of investment mentioned earlier, you will understand that if everyone followed it, there would be no trading in the first place. Because for every person who buys low, there should be someone who sells low. Conversely, for every person who sells high, there should be buyers who purchases high. And if buying low and selling high were to be the secret to success in crypto trading, why would there be someone who sells low and buys high? Therefore, your sale and purchase timings become critical in crypto trading.
Is timing the market easy, especially the crypto market that fluctuates wildly? The answer is ‘no.’ Cryptocurrencies, especially Bitcoin, have been volatile, with the price crossing $60,000 in November 2021, only to fall to around $30,000 in May 2022. The statistical graph below depicts how the Bitcoin pricing has moved from October 2013 to May 2022. Going by the golden rule of investment, the period up to October 2018 should have been the right time to purchase Bitcoin, and June 2020 to November 2021, the ideal time to sell. However, crypto trading is not so simple. Many factors are responsible for the wild price fluctuations. Below is a closer look at the factors that help decide when to sell cryptocurrency.
When to Buy and Sell Bitcoin?
Cryptocurrency trading differs from stock trading because stocks have a proven record, while cryptos do not. It is anybody’s guess whether cryptocurrencies like Bitcoin will touch the November 2021 heights again. If you are sure it will, you can buy Bitcoin today because the prices are hovering below the $30,000 mark. However, there is a downside to it. The Bitcoin prices could also go down. So, when to buy and sell Bitcoin?
Truth be told, if you are interested in trading crypto, your strategy matters more than anything. Though the timing is crucial, it is not the be-all and end-all of cryptocurrency trading. Therefore, the secret to success in crypto trading is to hold on to the asset long enough for appreciation. If you believe that a specific cryptocurrency has a bright future, it does not matter whether the prices today are at an all-time low or high.
Hence, the formula for the secret to success in investment needs a change from the generalized “Buy Low — Sell High” to a more realistic concept: “If you invest in crypto, believe in the asset’s potential and hold on to it for the long term.” If you invest in crypto to make a quick buck, you could lose more than you earn.
Hence, it is essential to maintain a long-term outlook. No one can say for sure whether a crypto will succeed or not. However, your investments can appreciate if you hold them for the long term. The specific term in the crypto parlance, ‘HODL’ (Holding on to dear life), represents this idea. Crypto platforms like Pokket also provide you with exclusive features to make high gains by merely HODLing your crypto assets, besides what you gain by selling them later.
So, When to Sell Cryptocurrency?
That said, how long do you have to hold crypto before selling? The following section discusses when to take profits on your crypto assets.
- Its value has appreciated a lot: If your crypto asset’s value has doubled or even tripled since you bought it, you can sell a portion of it and receive your profits. In this way, you recover your initial investment and make high profits. Taking profits now can act as a hedge against potential future losses.
- If you do not believe in your assets anymore: If you are sure that your crypto assets cannot recover, it is better to sell them off and minimize your loss.
- If you have found a better investment: If you find other cryptos overtaking your asset’s performance consistently and have promises for the future, you can sell it off and invest in a better cryptocurrency.
When Should You Not Sell Crypto?
While it is critical to know when to sell cryptocurrency and take your profits, it is also vital to know when not to sell your crypto assets. There are no rules regarding when not to disinvest; however, you should refrain from panic selling. It usually happens when you buy at high prices and find that the prices keep going down alarmingly. However, it may not necessarily be a bad thing. Only you need to be aware of the market conditions. If the price can go down, it can bounce back too. Bitcoin is an excellent example where the prices have dropped drastically only to rise exponentially subsequently.
Points to Consider when Selling Crypto
Here are some points to ponder when selling your crypto assets.
- How much to sell: If you believe in your crypto’s performance abilities, you can sell a specific portion to balance your portfolio.
- Tax implications: Before selling crypto, you should consider the tax implications. There could be a long-term capital gains tax component. Also, some countries tax all gains in crypto trading, irrespective of the holding period.
Points to Consider when Buying Crypto
It is also essential to consider the following aspects when buying crypto.
- Never fall for the hype: Instead of blindly jumping on to the bandwagon, you must do your research and make sure that the investment should last long-term.
- How much to buy: Going by the present trends in the market, one shouldn’t put all their funds into crypto investments. Besides, if you want to minimize risk further, another route to invest in cryptocurrencies is to keep investing small amounts from time to time instead of investing in lumpsum. This helps in averaging the overall price, and you need not worry about the fluctuations over the long term.
Final Words
Cryptocurrency trading differs from other forms of trading and investment like stocks, forex, bullion, and money market. Since cryptocurrency values fluctuate more than other assets, you must do your research before any decision-making process to avoid heavy losses and make significant gains. The golden rule of investment, ‘Buy Low — Sell High,’ still holds true, but you should tweak it for your benefit when trading cryptos. Now that you know the answer to the question, ‘When should you buy and sell crypto?’ it’s time to take the next step. You can start your crypto journey and open a Crypto Savings Account with Pokket that would not only enable you to hold crypto assets but also earn a passive income through them.
References
1. De Best, R. (2022, May 19). Bitcoin (BTC) price per day from October 2013 to May 19, 2022. Statista.
https://www.statista.com/statistics/326707/bitcoin-price-index/
2. Daly, L. (2022, February 23). When to sell crypto. The Motley Fool.
3. Brockman, K. (2021, June 24). Cryptocurrency: When is the right time to buy? The Motley Fool.
https://www.fool.com/investing/2021/06/24/when-is-the-right-time-to-buy-cryptocurrency/
