The decision to sell or hold is one of the most critical choices you’ll have to make as a cryptocurrency investor. It’s a choice you’ll have to make often, sometimes on a daily basis, depending on the market’s whims. Even when regulation inevitably rolls in the ability to make this decision inefficiently will remain relevant. Fortunately, you can ask yourself a few questions that will make things a lot easier for you.
Will Selling Result in a Loss?
One of the most fundamental questions you must ask before deciding to sell or hold is whether or not it will result in a loss. If the coin’s value has dropped below your purchase price, there is often little point in selling, especially if you think its worth will rise in the future. While there are other considerations to be made, this is where most investors can afford to draw the line. You don’t take a loss until you sell at a loss.
Will You Need Fiat Currency in the Near Future?
While many analysts say that many places around the world will eventually accept cryptocurrencies like Bitcoin or Ethereum, the time has not yet arrived. Most purchases you make, no matter how much money you have in coins, will utilize fiat currencies. Emergency money and rent, for example, will still require you to have your local currency.
This consideration is one of the biggest you should make when deciding whether or not to sell your holdings. If you have an urgent purchase or find the wallet a little light, selling might be a good idea. Even if it’s just a quick dip, it’s better to err on the side of caution. If it ends up being a longer and deeper dive, you’ll be happy you sold out, and you can always buy back in if you find your wallet full in the future.
Why Did the Cryptocurrency’s Value Drop?
Deciding whether to hold onto your cryptocurrency or not has a lot to do with the reason behind its current dilemma. A poorly worded headline or a malicious rumor can send the price tanking, but if the coin has a strong team and innovative technology behind it, it’s not going to stay down. Unfortunately, not all news is tame.
Sometimes, your chosen coin might dive because its team has proven not skilled enough to bring their vision to life. Other times, it’s because the technology behind it just does not work. On rare occasions, if enough people consider the currency dead, it might start losing its place on exchange listings. If even one of these reasons rings true, it’s time to sell before you take a loss.
Would You Buy the Coin at a Higher Price?
When it comes to investments, hypothetical situations can help put you in the right frame of mind. A scenario in which you must decide whether or not you’re willing to buy your currently questionable coin at a higher price forces you to consider not only the coin’s future but what you think about it.
If you think the coin will eventually hit greater heights, and you don’t need the money immediately, holding is almost certainly the correct call. That’s because if you’re right, you’ll eventually end up buying back in later anyway. Save yourself the trouble and just wait to be proven either way.
Do You Have the Time and Energy to Buy Back In Should the Situation Change?
Context matters. What seems like a good idea one day can become a terrible idea at some point, and cryptocurrency’s context is in constant flux. Coins that are sold one day can become tremendously valuable in the following months, or even days. That can happen for many reasons, from behind-the-scenes market manipulation causing a dip to news coming out in favor of the currency. This is also the core of the “buy low, sell high” philosophy. If you sell high now, as the dip is starting, are you willing to put in the energy to catch it on the rise?
Catching a coin as it starts to rise is more difficult than it sounds. You need to monitor the news and make sure your fiat currency is available for a snap purchase once you think it’s about to go up. If you’re not willing to put in the effort, but you feel the coin will eventually come up in stature again, just hold. You may miss out on some profit, but that frees up your head for other essential things.
Deciding whether to hold on to your coin or let it go is a difficult task. There’s a lot to consider, but many people forget one crucial fact that should make choosing easier: you can always change your mind. If you hold and realize you’ve made a mistake, you can immediately sell. If you sell and realize that it’s just a temporary dip, you can buy back in. Although a significant decision, it’s often not one you have to live with for the rest of your life. The power is in your hands, not in the coins’.