I believe that one of the most important questions when it comes to investing in altcoins is this one: When is the best time to sell your altcoins and collect the gains?
The reality is that most people are not taking their time to seriously think about this important question but the reality is that if you fly past the moon, then you`ve missed it. You will get pulled back down to earth and your gains will be burned in the atmosphere. The intention of my post is to help you to avoid this worst-case scenario. The altcoin market is on fire these days and our destination is clear: Let`s land on the moon and collect the gains!
The Essential Questions Of Altcoin Investing
There are two essential questions when it comes to altcoin investing. The first important question is where to find the 100x gems that you can potentially invest in? I have covered this question in my previous post. In case you`ve missed it, you may want to check out here: Only Altcoins Can 100x Your Wealth in 2021!
The second essential question is probably the most important question when it comes to investing in altcoins: When is the best time to sell your altcoins and collect the gains? That`s exactly what this post is about and I hope that it is helpful to you when you are going to plan your personal altcoin exit strategy.
Why Not HODLing Forever?
First of all, you have to ask yourself this simple question: Do I really want to get married to my altcoins and hodl them forever?
I personally would answer this question with a clear "NO" because at some point I want to make a profit. So at one certain point, I have to sell my altcoins and collect the gains because I don`t want to get married to my altcoins.
For this reason, you have to make up an altcoin exit strategy. This is essential when it comes to investing in altcoins. You need to have at least an idea of when and how to sell the altcoins that you have invested in. Now the thing is that you have to make up your own personal altcoin exit strategy.
In this post, I am only sharing my personal thoughts on this topic and I hope that you find it useful when planning your own unique altcoin selling strategy. The crypto market is highly volatile and also your portfolio is extremely dynamic. You are the one in charge and the final decision of what strategy works the best for you is totally up to you.
Missing The Top
The ideal point of selling would be the top but we have to face it and deal with it: You will most certainly not hit the top when you decide to sell your altcoins. That`s the reality. You have to accept the fact that you nearly always going to miss the top and sell your altcoins either too early or too late.
That`s why I believe that the real money is always made somewhere between the bottom and the top. In the end, the important thing is that you are making a profit.
Altcoin Vs. Bitcoin
One important step when it comes to finding your personal altcoin exit strategy is to understand what you are actually dealing with. You have to understand how the altcoin market works. You also should be able to put your understandings of the altcoin market into a higher context. The most important thing is probably to understand how altcoins are influenced by the movements of Bitcoin.
We all know that Bitcoin is the first cryptocurrency, it remains the most popular with the highest market capitalization by far. Every other cryptocurrency is consequently referred to as an altcoin. The chances that the total market capitalization of any altcoin will be larger than Bitcoin`s in any reasonable timeframe is extremely low. The main reason for this is that most of the smart money from big investors is still going into Bitcoin.
It is just starting very slowly that smart money is also going into altcoins, even Ethereum, the biggest altcoin, is still struggling with this. This seems partially caused by the Ethereum 2.0 upgrade. Many big investors evaluate this update as a material risk to their investment. However, the main point is that no altcoin is going to reach a higher market capitalization than Bitcoin anytime soon. Let me give you an example: Chainlink has a market capitalization of $4,844,988,096 while Bitcoin has a total market capitalization of $322,506,745,780 which is around 67 times more. It is extremely unlikely that Chainlink`s price will see a 67x price movent any time soon. If you are waiting for Chainlink to reach a 100x, then I have to say that you must be high on hopium or something like that. Now, please don`t get me wrong, I love Chainlink and I am holding it in my portfolio but I am simply not expecting a 100x price movement.
Another thing to consider is that Bitcoin`s price action also has a significant influence on the prices of altcoins. If Bitcoin`s price goes up, altcoins follow and if Bitcoin goes down, altcoins follow as well. Altcoins seem to experience their best gains when Bitcoin`s price is gradually increasing or moving sideways.
With all that being said, it seems to be a smart move to monitor your altcoins value in Bitcoin and not in dollars. The value of your altcoin in Bitcoin is giving you the best indication of whether your altcoin is rising in value compared to an investment in Bitcoin.
Analyzing And Evaluating The Tokenomics
Most important is gathering and evaluating information when it comes to investing. Every cryptocurrency has its own unique tokenomics. A vital part of putting up your own altcoin exit strategy is to analyze the tokenomics of the altcoins that you have invested in. Every single altcoin has its own unique tokenomics.
One important key factor to look at is the token allocation of your altcoin investment. The token allocation of each altcoin is different. You can use blockchain explorers like etherscan (for Ethereum and ERC20 tokens) to check if the tokens are allocated as originally outlined in the whitepaper. However, your main mission when you do your research on the specific blockchain explorer is to figure out what wallets are holding the biggest amounts. If you find a wallet that is holding more than 10% of the total token supply then you can consider this as a red flag and you should reconsider your pick. If these whales are selling their tokens after a nice pump to collect their profits, then the market gets flooded and the dump will be even harder.
When you do your whale wallet analysis, you might also want to check out the posts from the author D3F1 here on Publish0x. This Publish0x author is publishing whale wallet analyses frequently and his post may help you with your own whale wallet analysis.
There is also a method that can help you to determine the price that your altcoin can possibly reach. To do this, you need to be aware of the fact that there are different types, different segments of altcoins. There are payment coins like DASH, Bitcoin forks like Litecoin, DeFi tokens like Compound, oracles, NFTs, and so on and so on. Let`s say, you have invested in Band Protocol and you want to figure out what the highest price is that it can possibly reach in a reasonable timeframe. Band Protocol is an Oracle like chainlink which is the oracle with the largest market capitalization. Both tokens are comparable because both are oracles. If you are optimistic about Band Protocol, then you can say that it may become the oracle with the highest market capitalization. Band Protocol has a market capitalization of $129,677,449 while Chainlink has a market capitalization of $4,844,988,096 which is around 40 times more. So if you are optimistic on Band, then a 40x is possible. This is how you proceed if you want to determine the highest price that your altcoin can possibly reach. Find the right segment of altcoins that your altcoin fits in the best and then put it in relation to the leader of this concrete altcoin segment.
My intention in this section is just to point out that there are different selling strategies. In the end, it is totally up to you to figure out and decide what selling strategy works out the best for your altcoin investment.
One possibility is to sell your altcoins all at once but I believe that in most cases other selling strategies may be much smarter. However, it is totally fine to say I am going to sell all when it has reached a 10x, for example.
One alternative way of selling is taking out your initial investment. For example, you`ve bought some $LRC for a hundred dollars. Now the price has doubled and your investment in $LRC is now worth $200. By selling half of your $LRC, you are simply taking out your initial investment, what`s left in your bag is a worry-free investment.
Another smart alternative is to constantly sell a fraction of your altcoin investment each time the price goes up.
How To Secure Your Gains
The final point that you have to think about is how you want to secure your gains. There are different ways to do it and again, you have to figure out what works best for you. Of course, you can also combine these different options. So what are you going to sell your altcoins into?
One option, the option that I prefer, is to cash out your altcoins in Bitcoin. Well, some say that altcoins were made to steal your Bitcoin. I can totally understand this point of view but, however, I think differently. I think that it also works the other way around if you are smart. If you are smart then you can also make Bitcoin with your altcoins. This is actually what lots of smart investors are doing. They invest in altcoins to get more Bitcoin.
Another smart option to secure your gains is to sell your altcoins into stablecoins. Now you can use these stablecoins to earn interest on leading platforms like Compound or BlockFi. In this way, you can make even more profits on the profits that you have already made.
Gold And Silver
An interesting option is to sell your altcoins into gold or silver. There are some websites like jmbullion.com that allow you to buy precious metals like gold and silver with your crypto. It`s actually a great way to collect your gains as you get the physical stuff delivered directly to your house. I think that`s pretty cool.
Crypto-Backed Gold Tokens
An alternative to physical gold that is worth to be considered are crypto-backed gold tokens like Paxos Gold or Tether Gold.
My Final Words
No one can tell you when the best time to sell your altcoins is. You alone have to make that decision and no one else. It`s important that you find your own unique altcoin exit strategy, the one that works the best for you.
At the end of my post, I also like to remind you that my intention in this post is to raise your awareness of the most important question when it comes to investing in altcoins: When is the best time to sell your altcoins and collect the gains? My intention is not to replace your own research. I may look smart on my profile pic but I am not your financial sensei. 🤓 However, my post really reflects my own opinion.
I hope I could provide you with some interesting and useful information so that you can figure out your personal altcoin exit strategy. Thank you guys as always for reading, liking, following, and tipping 👍
I am also interested in your altcoin exit strategy, do you have any? It would be awesome if you would let me know in the comments.
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