As the turbulence continues to shake up the global financial markets, the cryptocurrency market is once again getting very close to the traditional equity market. As per CoinDesk, Citi has confirmed that the connection between bitcoin price and the stock market has very much grown, while ether has recorded high levels of short term volatility.
However, bitcoin’s volatility remains below its one-year average, where sharp price swings driven by broader economic uncertainty have returned. In this situation, investors are forced to consider a very important question, which is when is it sensible to be patient, and when will it be a wise move to sell crypto assets?
Portfolio Strategy
The consensus among professionals first of all is that the sell-off of crypto is determined by their function in the investors’ portfolio. On one hand, Joey Isaacson, the CEO of Nook, explains that if crypto makes up a small, but intentional part of a well-diversified portfolio, then investors can easily stand the short-term turbulence. He said,
“If it’s a small, designated slice of your assets across stocks, bonds, cash and maybe other alternative assets, then you have room to weather swings”.
On the other hand, for long-term investors with ten years or more horizons, the tolerance for volatility is relatively higher, but those who might want liquidity in a year or so should have a more specific exit strategy. When the size of crypto holdings increases relative to one’s total assets, the risk profile changes, and selling becomes a wise option.
Pre-Defined Price Targets
Making decisions based on one’s feelings is considered as one of the major risks in crypto investment. Isaacson emphasizes the need for having a predefined exit strategy that is strictly followed regardless of the market movements, whether it is a sharp rise or a sharp fall.
He does not want investors to depend on their instincts, instead he proposes to establish different levels of targets such as, selling part of the position after it has increased by 50% or completely selling it if the loss reaches 30%.
The allocation of the portfolio also influences this, where conservative investors usually restrict their exposure to crypto to 1%-3% of the total assets, and more aggressive ones may be ready to go up to 10%, depending on the stability of their income and risk tolerance.
Stop Losses
Active traders can secure their investment through the utilization of stop losses. The chief business development officer of FinchTrade, Yuri Berg, suggests that stop losses should be set about 5% to 10% below the entry point. These levels can be modified by technical indicators such as moving averages or support zones. He said,
“As prices rise, adjust your stop loss upward based on technical levels like moving averages or recent support zones”.
Berg advocates that stop losses are not mere suggestions, but is an absolute safety net. He recommends deciding the selling conditions, for both profits and losses, before the investments.
Reason to Invest
The primary reason for your investment in crypto needs to be considered first when making a decision about selling. Founder of SteelWave, Mitchell DiRaimondo, considers price volatility as the downside of being an early participant in an emerging financial system.
In the event that investors have faith in the technology behind it, and have a time horizon that spans market cycles rather than quarters, it will be worth it to them to hold through turbulence.
“If you understand what you own, believe in the underlying thesis and your time horizon is measured in cycles not quarters, you hold”.
DiRaimondo, instead of fixating on price targets, recommends focusing on wider indicators like liquidity trends, regulatory changes, and macroeconomic turning points.
Price Doesn’t Always Tell the Whole Story
Some analysts believe that price alone gives a very inadequate and poor signal of when to sell. The founder of Humanizer AI, Ankush Chowdhury, reviews adoption metrics, trading volume, and regulatory developments before he makes decisions.
A combination of decreasing transaction volumes, bad regulations, or reduced user activity can all indicate weakening fundamentals. Chowdhury thinks that if many indicators worsen at the same time, it is a rational choice to cut down on your holding or sell, even if the prices have not collapsed yet.
Risk Tolerance
The choice between crypto investing comes down to the temperament of an individual. Leo Fan, who is also the co-founder of Cysic said,
“Mainstream tokens like bitcoin or Ethereum reflect broader market cycles, particularly the US’s Wall Street, so they’re less affected by short-term swings and are generally better to hold in the long term”.
However, altcoins may go through very fast and hard to predict price movements. Fan proposes a balanced approach, which allows investors to cash in on their profits, but still have the chance to get back into the market if it does rebound.
“A sensible strategy is to take partial profits, such as selling half or a third of your portfolio, while keeping the rest in play. That way, you lock in gains but still maintain exposure if the market turns upward again”.
The Case for Selling
On the other hand there are the experts that definitely do not consider the crypto market as a holding one at all. Robert R. Johnson, who is the finance professor at Creighton University said,
“The time to sell is yesterday.”
He strongly opposes the idea of investing in cryptocurrency by saying that digital assets have no intrinsic value and cannot be assessed with the regular financial models. Furthermore, he mentions the warnings from the powerful investment platforms like Hargreaves London, which have already advised their customers to refrain from bitcoin investing because of its super high volatility and recurrent declines.
To people like Johnson who are skeptical towards crypto investments, the best time to sell will always be sooner rather than later. There is no one universal signal that will indicate the perfect time for every investor to sell crypto. The determination of the right decision depends on factors such as portfolio strategy, time horizon, market conditions, and personal risk tolerance.
While some investors perceive crypto as a long-term bet worth to be held through the volatility, others look at it as speculative and best to exit quickly. What really matters the most is having a solid plan, knowing your assets, and investing only what you can afford to lose in a market that is as unpredictable as it is promising.
