When is the right time to sell Bitcoin?
All good things come to an end.
Unfortunately, the price of Bitcoin cannot go up indefinitely. Indeed, in its phases it seems rather cyclical: the price tends to increase in the months that come after the halving of the reward for the miners and to retrace starting from the 2 years following that date. The uptrend period is defined as a bull-run while when the trend reverses it is referred to as a bear market. How can we know when the climb will be stopped? Today we are probably towards the end of the bull-run. No one can say for sure when the price peak will be reached, but it is possible to prepare for the moment when the reversal will occur.
The first thing to do is what is called "zoom-out", that is to look at the situation from a more general point of view. When the price goes up very quickly it is difficult to have an impartial and detached view, but not having it would mean getting caught by the FOMO and not being objective. Materially, it can help us to look at the graphs from larger time-frames: the weekly, or even monthly, candlesticks are clearer in this sense. In fact, they show less price volatility and instead highlight the long-term trend. A top structure in the monthly confirms the signals that come from the daily time-frame and, once identified, different strategies can be implemented.
Before proceeding, however, it is good to understand if and how much capital you want to sell. Once this is done, we need to study the price chart and identify a point where we think the price will arrive. These are the bases to proceed, let's now see the different approach strategies.
The first possible approach when we believe that an asset like Bitcoin has peaked in price for that market cycle is to go All-Out. Translated, this means selling the investment in bulk, closing the position. If you have been good (or lucky) this is the way to receive the greatest possible return on that asset, but the chances of guessing the exact time to sell are extremely slim. In fact, the risk is that of selling too soon and therefore making a missed profit.
2. Take Profit
To remedy the realization of the missed profit, the technique of the accumulation plan can be used in reverse. It is a question of predicting price steps at which to sell a part of our invested capital, on a constant basis. This allows you to make increasing profits and, if the asset continues to rise above the top we have identified, you can continue to sell. Furthermore, to minimize the loss due to a too early sale, it is possible to vary the percentage of capital that is sold by allocating a small part to the first sales and increasing quantities as you go up.
The latest bear market approach is only for those who have bought Bitcoin because they believe in its technology. These people don't care about the price fluctuation between halvings and the only thing they have in mind is to buy more and more. A Hodler does not seek the apex of a bull market to sell, but seeks it because he knows that as soon as the price starts to drop he will have to start buying back. In this case, the only advice I can give is to use annuity services such as Celsius Network or BlockFi to receive interest on savings, as these platforms guarantee a decent APY even during periods of market downtrend.
There is no right and wrong approach to closing your investments. The important thing is to be convinced and think for yourself. When do I sell my Bitcoins then? Once you have chosen the type of investor you want to be (short or long term investor) the answer comes by itself.
In the next posts we will see what the possibilities are for Bitcoin now that it approaches the all-time highs.
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