If you dare check your portfolio right now, I am sure it would be in red numbers now. Even if you have been the smartest investor, bear markets butcher your portfolio. And it hurts.
But the truth is that these are just unrealized losses and you don’t lose anything unless you sell. And that is why it is a must learn the art of selling your crypto assets without losing your gains in the Bear Market. Here are the top 5 exciting tips to do it.
Should You Just “Buy in the Dip”?
We all have heard this phrase plenty of times: ‘Buy the dip’. That’s great advice. During a dip, in general, you would rather not sell your assets. Especially during bear market conditions like we have at this very moment. Crypto space can be like a rollercoaster ride. So, make sure to not FOMO out! That is a classic beginner’s mistake, buy high and sell low. That’s a guaranteed loss. So, do yourself a favor and don’t do that!
That is the golden question! And surprisingly, it does have a concrete answer. There are a couple of scenarios that are the ‘right’ moments to sell your crypto. Let’s have a look at them.
TIP #1: Doubled your Investment
In case you have doubled your investment, take out the original investment. Everything else is from now onwards profit. Part of your strategy can be to invest 50% of this original investment in blue-chip coins like BTC or ETH.
For the other 50%, you can consider getting stablecoins. Now you always have money available to buy ‘golden’ opportunities or dips.
TIP #2 Sell Using DCA
DCA or dollar-cost averaging. We all know this to be a good strategy for investing. However, this strategy also works wonders when you want to take your profits out. The principal idea remains the same.
In this case, you take out a fixed amount of profits at a regular or at set times. That can be weeks or months. Now it doesn’t matter how the price fluctuates, you take out a steady profit. The same as if you use DCA when you invest.
You also want to check what tax implications your sale may have. A long-term capital gain has a much more favorable tax rate compared to short-term gains.
TIP #3 Revaluate Your Crypto Bag
Everyone tells you that before you buy crypto, you need to do your due diligence. In other words, DYOR or ‘do your research’. But nobody tells you it’s very important to reevaluate your crypto bag in current markets. Because it might happen that you purchased some project tokens in the bull, they did well but they might not be able to make it through this bear market. That means you could lose all your money.
For this, you need to ask yourself several questions. This will help you to figure out if a project is strong or weak. You can start by:
- Making a List: Explain the setup of the list by parameters, questions, and comments. Highlight one or two questions in the first parameter: Company & team. Explain that under comments you can have your system. Green and red colors. Yes/no. Links. Anything else.
- Exit Strategy: So, by now, you set yourself up to find the right project. You also have a good exit strategy. What could go wrong? Right, shall we file that under ‘famous last words?’ There are a few issues that are not under your control. They can throw a nice spanner in the machinery for you.
Tip #4 Stay Careful of Wallet Issues
The first thing that can throw you off course is a variety of issues with your wallet. So, your first step is to move your funds from your hard wallet to exchange or app. Here is where you can convert it into fiat.
Now, as we all know, for each transaction you need to pay a fee. In general, transaction fees are low. They can range from a fraction of a dollar cent to a few dollars. This all depends on the coin or token you send and on which network. However, this all changes once the network or blockchain becomes busy. Now, the transaction fee can easily go up to $100 or more.
However, there is a chance that the listed transaction fee is wrong. Now your transaction can fail. Not only did you lose the transaction costs, but, it failed. You may also miss out on a good opportunity. Sometimes it’s better to overpay, just to make sure that your transaction succeeds. This is how you can avoid it:
- Set the transaction fee manually: In general, native wallets have these options built-in.
- Have enough funds: You can pay for increased transaction fees. Therefore, it’s of utter importance that you know which coins you need, to make a transaction. Don’t get caught out by not having enough or the wrong coins in your wallet.
- Send a small amount of your crypto: This way you can see if everything works, and you become familiar with the system.
TIP #5 Exchange Issues
The two major issues you may encounter are that exchanges can freeze your account and that it can have an outage. Let’s look some more specifically into each of these two issues:
- Frozen account: This tends to be a problem for smaller or lesser-known CEXs. However, it can potentially become an issue with major exchanges as well. Here are some reasons why this could happen:
- The number of required confirmations: The network may only need 1 confirmation for a deposit. But once we get down to withdrawals, that number can change.
- Regulations: If you have already done your KYC, it is most likely just an excuse. The reason being is that exchanges had an outflow of BTC and ETH. Like most exchanges had, especially with BTC.
- Withdraw USDT and USDC: Be also aware that Tether (USDT) and Circle (USDC), have frozen user accounts. It may be a better idea to use DAI when withdrawing stablecoins.
Exchange Outage is Another Problem?
Most exchanges experience sooner or later an outage. That’s one more reason to use a hard wallet. This allows you to switch to another exchange in case your preferred exchange has an outage. Hence, this shows why setting up accounts at various exchanges is a good idea.
If the exchange is down, there’s another solution. Here are the steps you need to follow:
- You can now send it to Uniswap or PancakeSwap.
- Buy stablecoins, like USDT or BUSD.
- Once your exchange that you would like to use for taking profits is live again, you’re back in business.
Cryptocurrency exchange Coinbase experienced an outage after the airing of it’s advert for the first time during @SuperBowl LVI. This large traffic saw Coinbase having to throttle web traffic for a few minutes.🥶🚦
— CoinGecko (@coingecko) February 15, 2022
Before you invest in any coins, make sure to check that you can withdraw your preferred coins or tokens. Every so often, an exchange suspends a coin. Most exchanges will update you on such activities with email warnings.
TIP #6 Your Bank Starts to Play Up
If you start taking out big amounts of money, banks have no issues with freezing your account. Anything they consider a ‘suspicious activity’ opens the shooting gallery for them.
Therefore, you’ll have to jump through hoops and loops to a completely new level to avoid this. Here are some solutions:
- Give the bank a heads-up in advance: In case you want to withdraw serious amounts of money. This way, they should have no reason to freeze your account.
- Withdraw funds into various accounts: This way you spread the risk of having an account frozen. Just as with crypto transfers, it’s a good idea to do a test run first. Withdraw a small amount of money first. Get familiar with how this procedure works.
- Use Crypto debit cards: They bypass banks, and you have your fiat within minutes rather than days.
- Use a P2P Exchange: For instance, Paxful or Localbitcoins may be good options.
TIP #7 Tax and Regulation
The last part deals with your favorite topic. Tax and regulation. Therefore, make sure that before you take out any profits or gains, you know what the local tax situation looks like.
Other countries around the world have a wide variety of tax regulations. Also, some European countries are very crypto tax-friendly. For instance, Portugal and Germany. On the other hand, India has some high crypto taxes, up to 30%.
— The Moon (@TheMoonCarl) May 25, 2022
Moreover, on to regulation, and in the US, we think of the SEC. They might see some parts of the crypto space as securities. That is an ongoing story, see XRP. That case may set the direction of things to come with the SEC. A very useful website is the Crypto Rating Council. This site shows any crypto that may be under scrutiny or is at risk in any other regulatory way. Furthermore, regulatory bodies in various countries are looking at all crypto-related aspects. Cryptocurrencies, NFTs, and also DeFi.
As a result, it is fairly easy to track coins. As a result, receiving tainted crypto can have all kinds of implications for the receiver. However, relax, most or all major exchanges check for tainted coins. If you buy on a major exchange, there is almost no risk of attaining them.
Here we are at the end of today’s topic. There was an explanation on when it is a good time to take profits out. Furthermore, we also talked about DCA when profit-taking.
We showed you how to re-evaluate your crypto bag. Also, the icing on the cake is the options on how you can find an unexpected spanner in your exit machinery or strategy. Finally, at the same time, we also gave you good solutions on how to deal with these potential issues.
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