Wednesday, June 29, 2022

When To Sell Crypto Profits

Michal Van De Poppe On Price Targets For Ethereum And Cardano: When Is He Taking Profits

When To Sell Cryptocurrency – 3 Simple Steps (Taking Profit)
Zinger Brief
  • Michaël van de Poppe says Ethereum needs to break above a key resistance area.
  • He says Cardano will likely correct after reaching its resistance point.
Zinger Brief
  • Michaël van de Poppe says Ethereum needs to break above a key resistance area.
  • He says Cardano will likely correct after reaching its resistance point.

Popular cryptocurrency trader Michaël van de Poppe says that EthereumETH/USD is now en route to its next resistance at $3,500.

What Happened: Talking to his YouTube subscribers, the crypto analyst said Ethereum may correct if the leading smart contract platform fails to breach resistance at $3,500.

What you want to see is that we start to gain strength so that we start to accelerate even more instead of this crawling upwards. In that case, I think we can start taking those highs too and if we are not going to see continuations of strength at that point in time, Im looking to take my profit on Ether too, and then Im expecting ourselves to have a retest, Van de Poppe said.

Last week Ethereum crossed the $3,000 level which led to plenty of liquidations.

Interesting area approaching for $ETH, where we can see multiple areas of liquidity to be hunted, but also higher-timeframe resistance zone.If that breaks, party time is definitely on the horizon.

Michaël van de Poppe

Van de Poppe has said that there were relief rallies everywhere, but advised his Twitter followers to take their profits.

What Outcome Do I Want

Everyone wants to get money out of a trade. But, then again, when thinking about taking profits, the question is how much is enough? In terms of outcome, are you willing to risk it all and perhaps suffer a loss because you believe youll regain whatever you lost tenfold?

It isnt easy to be so sure about crypto because you generally dont know how the coin will behave. You could sell and see the price keep going up, for example, and regret selling so soon. But, then again, its really hard to tell because crypto prices can generally go up or down regardless of historical data.

So, whats a trader to do? Most of the time, the key is focusing on the percentage of profits youve already made. People have different preferences depending on how much risk theyre willing to take. However, most traders target at least 50% before they take profits.

That being said, you can target 100% profits too before you decide to take. You can even target higher percentages. It really depends on how much risk youre comfortable dealing with. It can be tempting to see where your investment takes you if, for example, it reaches 100% .

Know, however, that this is shaky territory and may put your investment at risk. This is alright as long as you can deal with extreme volatility. Otherwise, you should have a clear percentage in mind to signal when youre going to take your profits off the table.

What Does Selling Crypto Mean

Remember when you bought your first cryptocurrencies? Or perhaps you are thinking about it? You would spend your US dollars, Euros or other fiat currencies to get yourself your very first Bitcoin . Sure enough, buying crypto with money is a common entry point into the world of cryptocurrencies.

So where theres an entry point, there must also be an exit, right?

There sure is: you could sell your crypto assets. While with buying youd convert your money into cryptocurrencies, selling crypto is the exact opposite. You would get Dollars, Euros, Yens etc. in return for your digital assets. Its often referred to as cashing out, since youd be getting cash and getting rid of your cryptocurrencies. Well take a look at how you can do this later, but first:

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There Is A Bit Of Relief For Bitcoin Taxes

Bitcoin taxes can be a bummer, but at least you can deduct capital losses on bitcoin, just as you would for losses on stocks or bonds. These losses can offset other capital gains on sales. When youre done tallying your winners and losers, you cant write off a loss of more than $3,000.

With drastic fluctuations in bitcoins price happening all the time, many bitcoin speculators will have losses. If you have losses on bitcoin or any other cryptocurrency, make sure you declare them on your tax return and see if you can reduce your tax liability.

Investing In Markets With Low Liquidity

How to Know When To Sell / Take Profits

For your money to rise in value, someone else must be willing to buy it from you. As a result, order books on many new cryptocurrencies and micro exchanges are pretty limited. So even if you feel that Sprouts symbolizes the future of cryptocurrencies, you risk being connected with a coin that no one wants to buy, at least not at the price you desire.

Purchasing a currency with solid foundations as a long-term investment is perfectly acceptable. However, due to a lack of liquidity in the foreseeable future, these undiscovered diamonds are susceptible. As a result, sellers who have grown impatient with waiting for currency values to rise may be forced to accept a far lower price than they had initially planned.

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How Do I Scale Out

Lets assume you scaled into the market and didnt buy a lump sum at one point. You would scale out the same way you came in. If youre thinking, I bought all at once and am doing well, so I should sell all at once, then ask yourself if you bought at the perfect time. The answer will be no. You are better off moving out of your position in intervals just like an experienced investor enters the market. Start selling small amounts in a price zone that is below your final prediction.

For example, if you own 10 Bitcoin, start by selling .5 when you think Bitcoin is at a quarter or half of its cycle top. Preferably you will sell this .5 on a really green day rather than a dip in order to keep your sell average as high as possible. As Bitcoin continues to climb toward its peak destination, this will be time to increase your offload to decrease your exposure. Your next sell might be at 60% for 1 Bitcoin, 75% for 5 Bitcoin, and so on.

Timing the top is a fools errand. Success is selling what you plan to sell at a value thats 75% of the top, which is very achievable if you scale out with a plan. You may now be thinking, but even if I scale-out, how can I guess where the top might be to do so responsibly?

How To Take Profits And Reinvest

The idea of reinvesting your gains is a very good idea if you know how to do it. There are a couple of things you should know before you reinvest to make sure you reallocate your portfolio in the best way. Simply buying other coins randomly will not cut it, your need a system that holds up and has a proven track record of success. Below are some tips that will put you ahead of the curve.

Reinvest altcoin gains smart

Dont just blindly put your earned money in another altcoin that has been released on the market. Take part of your profits and invest them in a more stable cryptocurrency in the top 20 that you know has the potential to follow the market for a long time. Then take the other part of your capital and reinvest in some of the other projects that you are currently invested in to increase the positions. This is especially good if these projects havent taken off yet and prices are still low. Finally, if you have some capital left you can always reinvest in some coins that you consider more speculative. This investment is valid since you are using the money you earned in a previous investment and most of the capital is already put to work in other places.

Rebalance your portfolio

Buy the dips

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Find Your Favorite Model

This is probably the most critical part of the sell equation. Yes, there are narratives that institutional money changes everything this cycle, and Bitcoin will push to $500,000 or $1M. But counting on the price to achieve these levels this year seems more unlikely than likely Especially if you believe in past data as a roadmap to future data. Currently, the most popular models pin Bitcoins top between $100,000 and $300,000.

My top models include the Stock-to-Flow by PlanB, Top Cap Model by Willy Woo, and the Bitcoin Rainbow Chart by Blockchain Center. Once you have 3 models/predictions from reputable crypto analysts, take the average of the three. My average from my 3 models come to $241,000.

This is a solid average considering the average of the top for 200 models was about $231,000. It isnt necessarily wrong if your average is far off from $231,000. But bear in mind your prediction strays away from technicals and falls into the realm of fundamentals. This requires a different set of evidence beyond historical price data.

What Is A Long

When To Take Profit From Crypto – How I Decide When To Sell ( Cryptocurrency Investing )

Long-term investing is a method that typically holds an investment for more than one year. Typically, long-term investors are also passive investors. In other words, you dont buy or sell large quantities in a short period. Long-term investors can invest in stocks that increase in value, or they can invest in funds or ETFs for the long term. But in general, long-term investing is more of a set-and-forget approach.

Strategies for long term investment:

There are a few different strategies, but the overall theme is about Buy and Hold. Keeping this in mind, here are some strategies for long-term investors.

  • Value investing A strategy where an investor tries to buy a cryptocurrency for lower than its intrinsic value.
  • Growth investing Investing in companies that you believe will exceed the overall market cap.
  • Dividend investing Investing in firms that pay out dividends.

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How Do Cryptocurrency Taxes Work

For better or worse, capital gains tax rules apply to cryptocurrencies like Bitcoin and Ethereum. The Internal Revenue Service treats all cryptocurrency as capital assets, and you owe taxes when theyre sold at a profit. This is exactly what happens when you sell more traditional investments, like stocks or funds, at a gain.

How much you own in capital gains taxes depends on whether youve held your crypto for less than a year or more than one year. If you havent quite reached 12 months, your profits are taxed at short-term capital gains rates, a.k.a. your regular income tax rate. But if its been at least one year since you purchased your coins, youll qualify for a long-term capital gains rate thats lower than most income taxes, depending on your taxable income.

And just like if you sell any other investment at a loss, if your crypto investment has fallen in value when you sell it, you are able to claim a capital loss, which you may be able to use to offset other income taxes.

But cryptocurrency taxes comes with a couple of additional wrinkles.

Tracking Cryptocurrency Prices & Profits

There are a number of apps you can use to watch the price of your favourite coins and also check how much profit you have made form your investments.

My three favourites are Blockfolio, Coinfolio and CoinCap.

You can also set up price alerts which send you push notifications whenever the price drops or rises above a certain level.

Even though I have all three installed, I personally prefer Blockfolio due to its Signal feature, its a cool feature which sends me notifications containing news from the developers of a cryptocurrency I am tracking.

I havent used Coinfolio much so I cannot comment too much on its features but CoinCap has a beautiful pie chart that shows all your current cryptocurrency investments.

If you had to pick two you should definitely go with Blockfolio + CoinCap hands down.

Also Check: How Do I Short Bitcoin

Know What A Take Profit Strategy Looks Like

It will also behoove you to come to some decisions ahead of time about what you want your take profit strategy to look like.

For example, some traders prefer to exit their entire position simultaneously. Yet, other individuals prefer to baby step out of the market with exit orders across a range of prices. You need to make a decision ahead of time about your approach and then stick with it.

Remember that if you choose to leave incrementally, you must set stop-loss order. Why? This step will ensure you dont lose all of your gains.

How does a stop-loss order work? Consider the following example.

Lets say you have a one Bitcoin long position at $3,300 and an exit of fifty percent of the position at $4,000 for $350 of profit. What to do? Options include setting a stop-loss order at break-even $3,300 to stop losing money.

But if you see Bitcoin starting to nosedive, you can close the original order completely. In other words, setting a stop-loss order at break-even lets you avoid losing money on an already profitable trade.

Fill Out The Proper Tax Forms

4 TIPS on WHEN to SELL your CRYPTO! Maximize profits and ...

Once you have a record of your crypto transactions, youll need to fill out certain tax forms depending on how you used your crypto:

  • Form 8949. This form logs every purchase or sale of crypto as an investment. This should include the total number of coins, the date and price you bought, the date and price you sold and your gain or loss for each transaction.
  • Schedule D. This form summarizes your total capital gains and capital losses from all investments, including crypto.
  • Schedule C. If you received coins from mining, you need to disclose whether you received them as a business or as a hobby. If youre running a crypto mining business, you may owe self-employment taxes if your income exceeded your expenses for the year.
  • Schedule 1. If you report your crypto mining as a hobby, youd report this income on Line 8 of Schedule 1. You wont owe self-employment tax, but you become more limited on what you can deduct as an expense.

Read Also: How To Minimize Crypto Taxes

The Goals Of Taking Profits

To those maximalists that act like it is some kind of crime to ever sell crypto, you can feel free to ride that thing down 80%. But, I don’t feel like it.

Not only that, I think it is seriously stupid to do it.

I am about as bullish long-term on cryptocurrency as you can get, but I’m also a realist. And I have other goals in my life than to just “stack my bags” with digital assets.

So, I think it is smart to devise a personal strategy for taking profits from crypto.

That doesn’t mean you necessarily have to take those new dollars and go spend them elsewhere. You certainly could. But, even if you just park capital into stablecoins and ride out the correction, you could substantially increase your crypto holdings for the next bull run cycle.

So for me, these are the goals of selling crypto:

  • To take original investment capital back out. You can then deploy that capital into other things, but you still maintain all of those profits in crypto. It is then impossible for you to lose money.
  • To diversify into other assets. Real estate, for instance.
  • To park capital into stablecoin, giving you the capital needed to “buy the dip” after the bear market and increase your holdings for next time.
  • Let’s look at each of these things….

    Sell A Small Percentage At A Time

    To take out and maximize your gains, sell 5-10% at a time, depending on how big your holdings are in that particular crypto. If the crypto has gained more than 30% since you bought it, consider selling a small percentage every week.

    Since the crypto market is volatile, it’s advisable to place your sell order fractionally based on the market climate. We don’t recommend selling all your holdings in one go , as you might miss out on future potential gains, or you might still want to keep a portion of your holdings to HODL.

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    My Personal Goals For This Bull Market

    I am not going to ride this market all the way down again without making a major move. The amount of profit I have made in crypto is high enough that it would simply be stupid if I did that.

    My main goal right now is to purchase “Bitcoin Manor“.

    Yeah, I intend to buy another house. Larger than our current one, but that’s not the main point. We want more property around the home. A pool. Room for a garden to be more self-reliant. And, a place to park my RV right next to the house.

    These are things that would increase my family’s quality of life, of course. But, it is also an investment. Real estate has never been a long-term poor place to put capital.

    Our current home will be turned into a rental property and I expect I could clear $600-$700 per month in cash flow from our home. I will also save myself $230/month that I’m currently paying to park my RV in a storage facility.

    Now, given the inflationInflation is the rate at which the value of a currency drops over time. The result is that the prices … happening , I am planning to get a mortgage on this next house. This is a strategic move for me because I actually hold enough in crypto to buy the thing outright. But, instead, I’m going to make a down payment of 20%-30% and finance the rest at low fixed rate.

    My goal is to also use crypto to make a good dent in the monthly payment of the home.

    For more: How To Reliably Earn Interest On Your Crypto Holdings

    That’s the plan.

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