It was not long ago when a person or a group of persons with the pseudonym Satoshi Nakamoto mined the first Bitcoin in 2009. It was also the first cryptocurrency ever built utilizing blockchain technology. Nakamoto designed it to function over the Internet while allowing everyone to mine it by solving mathematical puzzles. In addition to this, people can buy Bitcoin from crypto exchanges and use it for payment or trading purposes.
Unlike traditional banking systems, Bitcoin transactions are encrypted with cryptographic keys but visible to all via a distributed public ledger. Because of the blockchain technology and the digital ledger that keeps Bitcoin from government control, Bitcoin becomes a decentralized universal digital currency. It is worth noting that Bitcoin price was moving at a snail’s pace during 2009-2016, but it was since the Bubble of 2017 that the digital currency has not looked back.
While Bitcoin is highly volatile because of its limited supply, which might interfere with your decision to sell Bitcoin, this article will help you understand the market and factors that influence its price.
Things To Keep In Mind Before Selling Bitcoin
While selling virtual currency is pretty simple, there are a few things that you should keep in mind to make sure you get a significant profit.
- The Platform
The two available ways to sell Bitcoins are crypto or Bitcoin exchanges and Bitcoin ATMs, with the former being the most popular and convenient. Find a platform that is secure, reliable, and transparent in transactions.
- Transaction Costs
Bitcoin transactions incur a nominal fee that varies with the exchanges and can be high in most cases. Select a crypto exchange that charges minimum processing fees to avoid a significant reduction in profits.
When you sell, swap, or trade your Bitcoin, consider how much tax you could be paying on those transactions.
- Timing the Market
Timing the market, e.g., by finding the exact moment to buy or sell before an upwards or downwards movement, is really hard. This has a lot to do with the fact that predicting the future is impossible, especially with a rather volatile asset like Bitcoin and crypto in general.
How To Decide When Is The Right Time To Sell Your Bitcoin?
Maximizing gains is fine, but minimizing regrets counts for a lot too. To keep things simple, let’s look at two possible scenarios at either end of the spectrum of investment outcomes.
Scenario One: Hold and the stock tumbles from $500 to $50.
Scenario Two: Sell and the shares soar to $5,000.
If you are on the fence when it comes to selling, there’s always a middle way as there is for many things in life: Sell enough, maybe half, to become rich in reality and not just on paper, then let the remaining do its thing. Doing this accomplishes several things:
- When you sell half or around half of your bitcoin, you lock in enough wealth to eliminate a lot of life’s money-related worries.
- Selling half of the Bitcoin has an advantage even if its price keeps rising because potential gains must be balanced against the possibility of losses.
- Selling 50% protects you in case of a dot-com-like collapse.
The goal of life is not always to maximize your returns. We need to occasionally consider minimizing regrets. In theory, investment decisions are probabilistic exercises using imperfect information about an unknowable future. But that leaves out the human side of the equation. The potential emotional response of regret when new information like price becomes available can be a debilitating experience.
When Should You Sell Your Bitcoin?
If you want to narrow down the reasons for selling Bitcoin, you can consider the stock to flow model, investors’ predictions, or technical indicators. Here is a quick walkthrough of how you can make predictions.
- Stock To Flow Model
This price prediction model was proposed by Plan B, a Dutch institutional investor, and is based on the fact that Bitcoin is a scarce asset. It requires you to compare the Bitcoin mining frequency yearly with the Bitcoins in circulation. Thus, you can quantify the value of the digital currency and plan your selling strategy accordingly. The model has been accurate so far in its predictions.
- Investors’ Predictions
By staying up to date with Bitcoin market trends and price analysis reports from expert Bitcoin investors, you can get an idea of when it would be wise to sell your Bitcoins.
- Technical Indicators
A trader should remember not to sell his holding before the stochastic indicator falls below the reading of 80.
Likewise, if the stochastic indicator has a reading below 20 and the price is trading below the 200-day moving average, then a rebound will be short-lived. On the other hand, if the price is above the 200-day moving average, then we can expect further appreciation in price.
Along with moving averages and a momentum indicator, professionals also use resistance and support levels. Apart from that, if you are not more technical then you can take help of Bitcoin Robots like Immediate Edge Bot. They are automated and programmed platforms.
What To Do If You Are Not Selling Your Bitcoin?
If you do not wish to sell your Bitcoins, store them in a secure digital wallet instead of leaving them with crypto exchanges. That way, you can see the market growing and decide what to do next at your convenience.
Bitcoin is so volatile and unpredictable that waiting long or jumping in early to sell your digital assets can leave you with a heavy feeling of regret. So once you have thoroughly researched, act quickly, since the price may change soon. Consider market factors, personal targets, technical indicators, and stock chart patterns if you want to make an informed decision to sell your Bitcoins. Research and Statistics also show that Monday or Tuesday are the best days to cash out your Friday long or take a short position to cash out on the subsequent Friday when the price is statistically lower. The middle way is that you offload 20% to 30% of holdings when the value of Bitcoin hits 4-6 times the investment. If the crypto declines sharply, then there won’t be any regret. If it rises further, still, you can watch the rally without any guilty feeling. This system balances potential gains against possible losses.