Cryptocurrency investing can be a wild ride. To give yourself the best chance of success, it's important to think not just about buying but also when to sell crypto.
When investing in stocks, a good rule is to buy and hold for at least five years. Crypto is an entirely different and much more volatile market, so the traditional rules don't always apply. Keep reading to learn how to know when to sell crypto and the factors to consider in this decision.
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When to sell
When should you sell crypto?
Here are the situations when you should consider selling a cryptocurrency investment:
The value has doubled or tripled since you bought it.
If your investment has shot up in value, you should probably sell at least a portion of it. For example, you could sell what you originally invested, and then you're playing with house money going forward.
Because of how volatile crypto is, profits can disappear quickly. Take at least some of your profits as a hedge against potential losses in the future.
You no longer believe in its long-term success.
Part of investing in crypto is knowing when to cut your losses. This can be difficult since people are often very passionate about the cryptocurrencies they buy. That's why it's important not to get overly attached to any project. Here are a few signs that a cryptocurrency may be on the way down:
- There isn't much development going on.
- You have doubts about the management team.
- The community that supports it is getting smaller and smaller.
You've found better investment opportunities.
Cryptocurrencies and blockchain technology are advancing rapidly. When Litecoin (LTC -1.0%) launched in 2011, it was a dramatic improvement on Bitcoin (BTC 0.08%) in terms of transaction processing. Since then, plenty of new cryptocurrencies have left Litecoin in the dust.
If other cryptocurrencies have surpassed one of your current crypto holdings in a key area, it makes sense to sell. You can get out before it loses too much ground and free up cash to invest in something better.
When to hold
When you shouldn't sell crypto
There are no firm rules on when you shouldn't sell crypto. The most important thing to remember here is that you shouldn't panic-sell because the price has dropped. If you still think it has long-term value, hang on to it.
Panic-selling is a decision that many crypto investors later regret. They buy when a cryptocurrency is at a high, sell when the price plummets, and then miss out if the price bounces back.
If the price has dropped and you no longer think the cryptocurrency is a good investment, then you should sell. However, a price drop should never be the only reason you sell.
Things to consider
Things to consider before selling crypto
Here are the most important things to consider before selling crypto:
How much will you sell? You don't need to sell everything, especially if it has increased in value. You could sell a portion of your holdings to rebalance your portfolio and hang on to the rest if you still think the cryptocurrency will be a winner going forward.
What are the tax implications? If the cryptocurrency has increased in value, you'll owe crypto taxes. It's taxed as long-term gains if you held the crypto for more than 365 days.
Long-term capital gains have lower tax rates than short-term gains, which are taxed as ordinary income. If you're close to the year mark, consider waiting to sell your crypto until after it passes that long-term gains threshold.
Things to consider before buying crypto
Here are the most important things to consider before buying crypto:
What makes this cryptocurrency a good investment? It's easy to get swept away by the hype surrounding a popular cryptocurrency. Whenever you invest in a cryptocurrency, make sure you've researched it thoroughly and that you believe it's a sound long-term investment.
How much will you invest? Putting your entire life savings in crypto is a bad move. A smart rule of thumb is to have no more than 5% to 10% of your investment portfolio in the crypto market.
Investing in CryptocurrencyThese technologies serve as the gateway between the digital blockchain and human society.
How Is Cryptocurrency Taxed? (2024 IRS Rules)This guide will explain everything you need to know about taxes on crypto trading and income.
Is Cryptocurrency a Good Investment?Investing in virtual currency has produced jaw-dropping returns for some, but the field still presents risks.
What Is the Next Cryptocurrency to Explode in 2024?Learn about the leading cryptos that are next to explode this year.
Should I buy?
Is now a good time to buy and hold cryptocurrency?
Yes, now is a good time to buy and hold cryptocurrency. The key is to pick quality cryptocurrencies with legitimate use cases because they have the best chance of long-term success.
Two recommendations for new investors are the two coins at the top of the market, Bitcoin and Ethereum (ETH -0.14%). Bitcoin leads the crypto market as a whole and has become popular as a digital store of value. Ethereum launched the first programmable blockchain. It's now the most popular option for decentralized finance (DeFi) platforms that provide an alternative to traditional financial services.
There are plenty of other worthwhile cryptocurrency investments available, including other coins and cryptocurrency stocks. If you spend some time researching, you can find quality investments to buy and hold.
Lyle Daly has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
FAQs
You might want to sell your crypto under some specific circ*mstances. If there is a lack of blockchain development progress or a string of negative news, you might want to sell your cryptocurrency. If you've reached your investing goals or want to reallocate your holding, you might want to sell your cryptocurrency.
What cryptocurrency does the Motley Fool recommend? ›
The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Ethereum, and Solana.
When to cash out crypto? ›
The decision to cash out crypto or Bitcoin depends on your financial goals and market conditions. You may want to lock in gains, cut or harvest losses for taxes, or simply use your digital assets in the real world. It's crucial to consider tax implications and market timing.
When should you take profits on crypto? ›
If you have made a sizeable profit so far but don't see any long-term potential or value in the coin anymore, you might want to think about withdrawing your earnings and reinvesting them elsewhere. If it is the case that you have bought cryptocurrency without any goal, set a goal.
How long should I wait before selling my crypto? ›
It's taxed as long-term gains if you held the crypto for more than 365 days. Long-term capital gains have lower tax rates than short-term gains, which are taxed as ordinary income. If you're close to the year mark, consider waiting to sell your crypto until after it passes that long-term gains threshold.
How do you know when to buy or sell crypto? ›
Cryptocurrencies like Bitcoin can experience daily (or even hourly) price volatility. As with any kind of investment, volatility may cause uncertainty, fear of missing out, or fear of participating at all. When prices are fluctuating, how do you know when to buy? In an ideal world, it's simple: buy low, sell high.
Which coin will reach $1 in 2024? ›
In the dynamic landscape of cryptocurrency, these ten coins, including TRON, Shiba Inu, Astar, Kaspa, Dogecoin, Stellar, Kava, Polygon, Cronos, and VeChain, present diverse potentials for reaching the $1 milestone in 2024.
What are the 5 most profitable cryptocurrencies? ›
Top 10 Cryptos in 2024
| Coin | Market Capitalization | Current Price |
|---|
| Bitcoin (BTC) | $1.39 trillion | $71,000 |
| Ethereum (ETH) | $455 billion | $3789 |
| Binance Coin (BNB) | $103 billion | $698 |
| Solana (SOL) | $79 billion | $198 |
6 more rowsSo Motley Fool is better suited to long-term investors focused on high growth potential while Morningstar is preferable for quantitative investors who rely on metrics and models.
Why is it so hard to cash out crypto? ›
Bitcoin is a digital asset, meaning it must be exchanged for fiat currency (USD, EUR, etc) before you can cash out. The value you receive when selling Bitcoin depends on the crypto market and the levels of supply and demand. Additionally, there may be a markup by the exchange as well as network fees.
9 Ways to Legally Avoid Paying Crypto Taxes
- Buy Items on BitDials.
- Invest Using an IRA.
- Have a Long-Term Investment Horizon.
- Gift Crypto to Family Members.
- Relocate to a Different Country.
- Donate Crypto to Charity.
- Offset Gains with Appropriate Losses.
- Sell Crypto During Low-Income Periods.
As long as you hold digital assets you purchased with fiat currency without converting them into cash or other crypto, you are not required to report or pay taxes on any potential gains to the IRS.
Can you make $100 a day with crypto? ›
Generating a consistent income of $100 a day solely through cryptocurrency trading or investing is feasible, but it comes with significant challenges and risks. While some individuals have achieved this level of profit, it's crucial to understand that crypto markets are highly volatile and unpredictable.
How long does it take to make good money from crypto? ›
The time it takes to make a profit in cryptocurrency can vary greatly depending on various factors, such as the investment strategy, market conditions, and the specific cryptocurrency being traded. Some investors may see profits in a matter of hours or days, while others may take months or even years to realize gains.
Should I sell my crypto for a loss? ›
If you held the asset for less than a year, it is considered short-term, and you will pay ordinary income tax rates. If you sell your crypto for a loss, the IRS allows you to offset losses against other income on your tax return. These so-called “realized losses” can be used to offset other taxable investment profits.
What to expect from crypto in 2024? ›
The cryptocurrency market has witnessed a remarkable trajectory of growth, with projections indicating a leap from $51.5 billion in 2024 to $71.7 billion by 2028. This represents a compound annual growth rate of 8.62%, showcasing the burgeoning interest and investment in digital currencies.
Why is my crypto selling for less than it's worth? ›
Slippage is when the price of an order executes at a drastically higher or lower price than you expected. Due to the volatility of cryptocurrency, the price of an asset can fluctuate often depending on trade volume and activity.
Is it worth keeping money in crypto? ›
The truth is that cryptocurrency is an extremely volatile asset. Investors need to understand that owning crypto involves taking on a great deal of risk in their portfolios. But for investors who understand how to manage risk, crypto could present great opportunities.
