Best Time to Sell Cryptocurrency: Mastering Market Cycles
Every investor must find the right time to buy but also to sell. It is essential to know when to sell in any type of market. And even more so in the crypto market due to its considerable volatility! In this article we will see what is the best time to sell cryptocurrency. So, let’s get started.
Best Time to Sell Cryptocurrency – market cycles
Market cycles in the cryptocurrency market refer to the periods of rises and falls in the prices of cryptocurrencies, which are influenced by various factors such as market sentiment, investor behavior, regulatory news, and technological developments. Understanding these cycles is crucial for traders and investors because they dictate the general health and trend direction of the market over time. Here’s a closer look at these cycles and their role in determining the best times to buy and sell:
- Markup Phase: Following accumulation, the market enters the markup phase where prices start rising steadily. This rise is usually supported by increased public interest and positive media coverage. More investors jump into the market, further driving up prices. Traders typically look to buy early in this phase and may sell as the phase matures to capitalize on the gains.
- Distribution Phase: After a significant markup, the market may enter a distribution phase, where sellers begin to dominate. This phase is characterized by increased volatility and the beginning of a price decline. The early part of this phase might still offer selling opportunities at higher prices before a full reversal sets in.
- Markdown Phase: This is where the market sees a significant decline in prices. It’s marked by negative sentiment, bad news, and often panic selling. The markdown phase is generally the best time to sell, ideally early on to avoid larger losses, but it’s also a period where seasoned investors might begin to look for the next accumulation phase to start buying again at lower prices.
Understanding these market cycles is fundamental for timing buy and sell decisions in the cryptocurrency market. By recognizing the phase the market is currently in, traders and investors can make more informed decisions.
The best times to sell are during the late markup phase when prices are peaking and just before entering the distribution phase where prices may start to fall sharply.
The best time to sell cryptocurrency – useful tips
If There Has Been a Lack of Development Progress
Sometimes, a cryptocurrency project starts with high hopes and a rising token value, only to see the price steadily decline due to insufficient development progress. Crypto teams emphasize transparency and regular updates because if they fail to deliver promised products, investors will notice and may consider selling.
If You Have Gained a Substantial Amount
On the other hand, if your crypto investment has doubled, it might be time to take profits. You can either cash in and reallocate your capital or continue holding if you believe in the project’s fundamentals.
You Want to Reallocate Your Funds
Whether facing gains or losses, selling to reallocate funds can be a wise strategy. This allows you to recover from losses or invest in another promising project. However, make sure your decision is well-considered, especially if you believe in the potential of your current investment.
A Spate of Negative News
The cryptocurrency market is highly sensitive to news. Negative media coverage can lead to significant price drops. For example, during the TerraUSD crisis, some investors sold their LUNA early on after negative reports. Staying informed can help you make timely decisions in this volatile market.
Anticipate a decline
The cryptocurrency market is cyclical. After periods of increase, corrections of more or less considerable magnitude follow. It’s a particularly volatile and nerve-wracking market.
Also, it is often beneficial to anticipate these fluctuations by selling your cryptos. A way to gain peace of mind and benefit from market performance.
Withdraw your profits
No assets rise to heaven. Also, it is essential to “pay yourself” as they say in the financial markets. When one of your cryptos performs well, you should not hesitate to withdraw your profits. Selling your cryptos should allow you to take profits on a regular basis and thus avoid suffering from this sometimes tiring market.
Stablecoins, an alternative to selling crypto
Exchanging cryptocurrencies for stablecoins has become a popular way for crypto traders and crypto investors to protect their capital against cryptocurrency price volatility.
Stablecoins are cryptocurrencies that are typically linked to a fiat currency, such as the US dollar, or a physical asset, such as gold. This allows them to maintain a stable value, usually close to 1:1 with the underlying currency or asset.
By trading cryptocurrencies for stablecoins, investors can profit when cryptocurrency prices rise, while protecting their capital against volatility. This also allows them to maintain their purchasing power if crypto prices fall.
Stablecoins are also useful for transactions outside of cryptocurrencies, as they can be used to purchase goods and services online, or even be withdrawn as cash in some cases.
There are many types of stablecoins available on cryptocurrency exchanges, each with their own characteristics and benefits. Commonly used stablecoins are Tether (USDT), USDC, DAI etc. It is important to choose a stablecoin that meets your needs and understand the risks of using it before using it.
By using stablecoins rather than selling their assets, investors can improve their crypto trading strategy and protect their capital against price volatility. This also allows greater flexibility for transactions outside of cryptocurrency, providing a risk management solution for traders and investors.
Taxation related to the sale of crypto
The sale of cryptocurrencies is considered a trading activity and is therefore subject to income taxes. Gains made from the sale of cryptocurrencies are considered movable capital income and are therefore subject to income tax at the rate of 30% (or at a reduced rate of 17% for capital gains carried out by non-professional individuals).
It is also important to note that if you have made significant gains from selling cryptocurrencies, you may be subject to Real Estate Wealth Tax (IFI). It is therefore important to consult an accountant or tax advisor for advice on the tax obligations associated with the sale of cryptocurrencies.
Best time to sell crypto – Bottom Line
Selling your cryptos is child’s play. Many easy-to-access solutions exist that allow you to quickly cash out your winnings. Indeed, you should not hesitate to withdraw your profits on a regular basis to reward yourself.
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