According to CoinDesk, investment bank Citi recently stated that the connection between the cryptocurrency market and traditional equity markets was once again getting closer. With volatility increasing across asset classes, bitcoin is still sensitive to market swings in equities and ether has also shown higher short-term volatility. Even though bitcoin’s volatility is below its one-year average, the crypto market has experienced multiple swings over the last little while due to broader market uncertainty.
As the cryptocurrency market becomes more volatile, how can you tell if you should hang in there or bail on it? GOBankingRates consulted with experts to determine how one can know when it’s time to sell their crypto.
“If it’s a small, designated slice of your assets across stocks, bonds, cash and maybe other alternative assets, then you have room to weather swings,” said Joey Isaacson, CEO of savings app Nook. Isaacson believes that knowing when to sell depends on the role crypto plays in your diversified portfolio. If you’re investing for the next decade, then you can handle some volatility. However, if you need the money in the next year or your position has grown, you’ll want to set a limit for when you’ll sell your crypto assets.
“A pre-defined exit plan prevents emotional decisions when markets roar or crash in the volatile crypto market,” Isaacson said. He recommended setting layered goals so you have targets to aim for. He suggested selling a portion of the position if the price gains 50% and setting a stop-loss or risk threshold if it falls 30% from your entry or if your portfolio allocation becomes too large. This logic makes sense because if you’re down 30%, you may want to consider moving on before you lose even more money.
When it comes to portfolio allocation, Isaacson believes that conservative investors might cap it at 1% to 3% of total assets while more aggressive ones could go as high as 5% to 10%, depending on income stability and risk tolerance.
“A practical approach is to set stop losses around 5% to 10% below your entry point for active trades,” said Yuri Berg, MBA and chief business development officer of FinchTrade. “As prices rise, adjust your stop loss upward based on technical levels like moving averages or recent support zones.” Berg pointed out that stop losses are survival tools and not suggestions. He urged to decide the conditions for selling, whether for profit or to cut losses, before investing.
Mitchell DiRaimondo, crypto expert and founder of SteelWave, noted that volatility is the tax you pay for being early to an emerging financial system. “If you understand what you own, believe in the underlying thesis and your time horizon is measured in cycles not quarters, you hold,” he added.
DiRaimondo doesn’t subscribe to the theory that you should wait for a fixed selling price because he believes that defined conditions are more critical. He recommended watching liquidity, regulation and macro inflection points. This leads us to the next point.
Random price points are less important than market conditions, according to Ankush Chowdhury, founder of Humanizer AI. He looks at adoption metrics, trading volume and regulatory news before deciding whether to sell or hold a cryptocurrency asset.
Here are the market conditions that Chowdhury reviews before making a decision:
Chowdhury noted that price alone doesn’t reveal much, because a digital asset may not be a good investment if its use is waning. However, if institutions are accumulating bitcoin, it might make sense to buy more at any price. He uses Glassnode for on-chain data and CoinMarketCap for volume trends. He recommended reducing your position and selling a crypto asset when two of the three factors go south.
Leo Fan, crypto expert and co-founder of Cysic, noted that market volatility has always underpinned crypto cycles. “Mainstream tokens like bitcoin or Ethereum reflect broader market cycles, particularly the US’s Wall Street, so they’re less affected by short-term swings and are generally better to hold in the long term,” he said. Fan warned that altcoins can be harder to predict. However, he believes that deciding whether to sell comes down to a trader’s personality and risk tolerance.
“A sensible strategy is to take partial profits, such as selling half or a third of your portfolio, while keeping the rest in play. That way, you lock in gains but still maintain exposure if the market turns upward again,” Fan added.
“The time to sell is yesterday,” said Robert R. Johnson, Ph.D., chartered financial analyst (CFA), chartered alternative investment analyst (CAIA) and professor of finance at Creighton University. He believes that holding crypto assets isn’t a wise move and that you should look to sell them immediately. Johnson stated that investing in cryptocurrencies doesn’t make sense because there’s no way to value them using fundamental financial tools. He understands that speculators are drawn to the volatility of crypto, but he doesn’t see it as a traditional investment.
Johnson cited a report in Fortune where Hargreaves London, the biggest retail investment platform in the U.K., advised clients against investing in bitcoin because they felt it had no intrinsic value. The report said although bitcoin has delivered strong returns over the long run, it has also gone through multiple phases of significant decline and remains a highly volatile asset — posing far greater risk than traditional investments like stocks or bonds.
Investing in cryptocurrency assets is a polarizing subject and you’ll find a wide variety of feedback when it comes to deciding on when to buy or sell. As always, we recommend conducting your own research and investing only an amount you’re comfortable with, as there are still many risks involved.
