A heads up: At 123Cryptos, we do not provide financial advice. The following content is based on our own experiences and thoughts.
Bitcoin is not just an investment
We all have our own goals and decision-making
When is the right time to sell?
Investing: A World of Opportunity
Investing is the practice of planting your hard-earned money in an asset with the hope that it will blossom into a larger sum over time. It's an ancient practice, the cornerstone of wealth building and financial security. People invest in various assets, from stocks and real estate to precious metals and, more recently, cryptocurrencies like Bitcoin.
Bitcoin: A Versatile Asset
Bitcoin isn't just a one-size-fits-all investment. People use and view Bitcoin differently. For some, it's a digital piggy bank, a store of value they plan never to tap into, safeguarding their wealth for the long term. For others, it's digital cash, a medium of exchange they intend to spend in the future. In El Salvador, Bitcoin is already an everyday currency, highlighting its versatility.
Emotions in Investing: Fear and Greed
The world of investing is filled with emotional highs and lows. It's a constant battle between fear and greed. When prices are skyrocketing, greed can cloud your judgment. You might be tempted to buy more Bitcoin, driven by the prospect of quick riches. Conversely, during price drops, fear can overpower rational decision-making. You might be inclined to sell in a panic, fearing the loss of your investment.
The Fear of Missing Out (FOMO) in Bitcoin
In the fast-paced world of Bitcoin and cryptocurrencies, the Fear of Missing Out, commonly known as FOMO, is a familiar emotion.
Bitcoin's extreme volatility, characterised by rapid surges and sharp declines, creates a sense of urgency. When prices surge, as they have done many times, it's easy to be gripped by the fear of missing out on substantial gains. But when prices plummet, fear of losing out takes over, potentially driving you to panic sell.
Bitcoin as an Investment: What History Tells Us
If you consider Bitcoin an investment, history offers valuable insights. Bitcoin has weathered several price cycles.
A key indicator frequently discussed in the Bitcoin world is the 20-week moving average. Historically, buying Bitcoin when it's below this moving average has been a sound strategy. Additionally, Bitcoin's price tends to surge around nine months after a halving event, a scheduled reduction in mining rewards. These historical trends can guide your Bitcoin investment strategy.
The Bigger Picture: Why Invest in Bitcoin?
But why do many investors view Bitcoin as a long-term play? Let's discuss!
1. Hedge Against Fiat Debasement:
Bitcoin is frequently considered a hedge against the devaluation of fiat currencies. Unlike traditional money, Bitcoin isn't controlled by governments or central banks.
Bitcoin sticks to a set of strict rules and has a fixed supply, capped at 21 million coins. This scarcity makes it resilient to the unpredictable nature of monetary policies that can lead to currency devaluation.
It is likely you are aware of the high inflation levels across the world. We could discuss and deliberate all day about the underlying causes, but in simple terms, printing more money creates debasement which ultimately leads to higher prices.
Bitcoin fixes this.
2. Transparency and Immutability:
Bitcoin operates on a transparent blockchain, rendering all transactions traceable and verifiable. Once a transaction lands on the blockchain, it's there forever, offering a level of immutability that traditional financial systems can't match.
3. Ownership and Control:
Owning Bitcoin grants you more control over your assets. With a private key, you possess direct ownership, allowing you to transfer, store, or spend your Bitcoin without relying on intermediaries like banks.
4. True Financial Inclusion:
Bitcoin has the potential to provide financial services to the billions of unbanked and underbanked people worldwide. Its decentralised nature enables individuals to access and manage their finances without traditional banks.
Why You May Consider Selling Bitcoin
While many investors choose to hold onto their Bitcoin for the long term, there are scenarios where selling might make sense.
The decision to sell Bitcoin is a significant one, and it should align with your financial goals and risk tolerance. Here are key factors to contemplate:
1. Achieving Financial Goals:
If you've accomplished your intended financial objectives with Bitcoin, like saving for a specific purpose, selling may be in order. However, it's worth thinking about the reasons why Bitcoin has gone up in the first place.
Is selling your Bitcoin for £ or $ actually the best decision for the long-term? That said, it may well be necessary for the short-term. It's unique for every person but the point still stands about questioning why the price has gone up at all.
2. Diversification and Risk Management:
Diversifying your investments by reallocating some of your Bitcoin holdings into other assets can help manage risk. This could be in the form of stocks or a house.
It may become especially relevant when your portfolio becomes overly concentrated in one thing. Once again, though, you must ask yourself if you will be better off discarding Bitcoin for something else. If you don't have a house and need somewhere to live, of course, it makes sense to offload some.
But, consider the pros and cons of diversifying your assets. It may be better from a risk management side of things, but usually sticking to the fastest horse works out the greatest in the end.
Life can be unpredictable, and unforeseen expenses can crop up. Selling Bitcoin might be necessary to provide liquidity for emergencies or unexpected financial demands.
Nothing is more important than your health and well-being and therefore it needs must, then it may be an important thing to consider.
4. Volatility and Emotional Well-being:
The roller-coaster price swings of Bitcoin can be emotionally challenging. If you find it difficult to stomach the volatility and it's causing stress or fear, it might be time to sell part of your holdings to ease your mind.
We recommend to follow the old adage of "never invest more than you can afford to lose".
So, When Is the 'Right' Time to Sell?
The 'right' time to sell Bitcoin depends on your unique circumstances and investment goals. While emotions like FOMO, fear, and greed can strongly influence your decision-making, it's essential to balance these emotions with rationality and strategy.
The history of Bitcoin serves as a valuable guide, but ultimately, the 'right' time to sell varies from person to person.
In our course, we go through all the basics of Bitcoin as well simply explain the risks and challenges associated with it. Start learning with us today!