With your rapidly growing crypto portfolio, aren't you wondering when is the best time to sell cryptocurrency to secure your profits? Here are three powerful strategies to help you out!
Hey Bow Tie Nation, all you out there in the Nation know, I’ve gone cuckoo for crypto-puffs this year.
Now while I’m a long-term investor, that roller-coaster of prices and the risk in cryptocurrency can make even the Gen-Z investors old before their time.
And the biggest source of stress is knowing when to sell your cryptocurrency, so in this video, I’ll show you three strategies for selling crypto, three ways to know when it’s time to lock-in your profits. Stick around because then I’ll show you how I’m applying these three sell strategies in my own portfolio along with price targets on each crypto I own.
We're building a huge community on YouTube to beat your debt, make more money and start making money work for you. Click over to join us on the channel and start creating the financial future you deserve!
Join the Let's Talk Money community on YouTube!
I’m partnering with BlockFi for the video I use the platform to earn up to 4% interest on my bitcoin and Ethereum and up to 8% on stablecoins. There are no fees to buy or sell bitcoin on BlockFi and it takes less than five minutes to get started. I’ll leave a link to BlockFi in the description below. Click through and get a bonus of up to $250 when you open an account plus earn interest on your crypto.
Nation, even for those of you with diamond-hands out there, the die-hard long-term investors in cryptocurrency, having a sell strategy will be one of the best things you can do. Not only is following one of these three sell strategies going to tell you exactly when to take profits, but it dials down the stress of investing in cryptocurrency to a one instead of the nail-biting experience it usually is.
In fact, most crypto investors have no idea when they should sell, when to lock-in those profits so they stay millionaires rather than losing most of their investment. This graphic on Bloomberg shows the number of millionaire bitcoin holders has fallen by more than 20% since the recent price drop, literally tens of thousands of one-time millionaires that are now wishing they had a sell strategy.
And before we get to that first strategy, understand I don’t believe you can ‘predict’ the beginning or end of bull markets in crypto. We’ve seen some evidence of a cycle in prices, just like with the economy and stocks, but this market is so new that we really don’t know. I know a lot of investors look at the bitcoin halving cycle which happens every four years and seems to cause a big move in the price but even this isn’t highly predictive of crypto prices.
That’s why the first strategy here doesn’t try to predict cryptocurrency prices or forecast an end to the bull market. This first strategy for when to sell your crypto is all about YOU!
What are your goals? What do you actually want to do with this money because at the end of the day, that’s all that matters.
Nation, so many investors are chasing stocks or crypto or other investments and have no idea what that financial destination looks like. And just like starting out on a road trip without knowing where you want to go, not knowing your financial goals is just going to leave you broke down and out of gas.
And this goes beyond just picking some arbitrary number like a million dollars as a retirement goal. This means sitting down and creating a mental picture of your goals. What are you doing on a daily basis, where are you and who are the people around you?
Having those goals defined, you’ll be able to see exactly how much that lifestyle is going to cost and how much you need to make on your investments. You can set a target price to sell because you know that’s exactly how much you need.
But beyond using this strategy to know when to sell your crypto, it’s also going to help motivate you and drive you forward. Anytime prices fall or the budget gets tough, you can take out that mental picture of you sitting on a sandy beach somewhere and use that to help motivate you to keep investing.
Now I want to reveal the second strategy for when to sell but I’ll walk you through an example of how to use each of these towards the end of the video.
Our second strategy for when to sell your cryptocurrency is going to be a staggered sell-high, buy-low strategy.
This is where you set an initial price target in each of your cryptocurrencies, and we’ll talk about how to do that next, and just gradually start taking profits at that point. For example, if my three- to five-year price target for bitcoin is around $190,000 but it shoots up to $80,000 each over the next few months…I would be getting nervous that investor enthusiasm is getting ahead of itself.
Using this strategy, I might sell 10% of my portfolio at this point to take advantage in the run. If prices kept climbing, I might sell another 10% of the portfolio in the next month and do this for three- or four-months.
This keeps me invested so I benefit from the higher prices but also takes money off the table and reduces my risk just in case prices come down. The best part about this strategy is, as the price is rising, you might be selling 10% of your cryptocurrency each month but your portfolio crypto value is still rising if prices are rising faster than ten percent.
And I know a lot of you are thinking, this strategy is great if price do fall and you locked-in some profit but what if prices keep rising? Think of all the return you’re missing out on.
But understand, and this is the reality of FOMO that people don’t understand, investing isn’t about what you might be missing out on but what you actually earn. You can sit there and fantasize about potential 10X returns all day but it’s nothing more than a dream until you’ve actually booked those returns and have the money to spend.
Nation, do not let that fear of missing out keep you from making the right decision about your investments.
The third strategy before showing you examples of each of these, is going to be to have specific price targets for each crypto you own.
I shared my price targets for each of five cryptocurrencies including bitcoin and Ethereum in a previous video. I’d actually recommend having multiple targets for each token you own and defined percentage of your crypto you’re going to sell at each point.
For example, if your bitcoin target is $190,000 then maybe you have lower targets at $120,000 and $160,000 and tell yourself you’re going to sell fifteen- or 20% of your holdings at each of those levels.
And again, this isn’t about being weak and selling early but is actually going to give you more conviction to hold because you’ve got those defined sell points. It’s no longer a daily struggle of watching those prices, wondering when to sell. You know exactly when you’re going to sell and you’ve taken the guesswork out of investing.
Now having a strategy for when to sell your cryptocurrency, or really any investment, and then actually being able to stick to it is what separates the winners from the guy sitting at the bar 2am talking about how he used to be rich.
It takes discipline, it takes patience and it takes guts to stick with your strategy when crypto prices rise or fall 10% in a day.
So I want to share my own price targets and investing strategy as a way to show you how to apply these three ideas and I’ll use my own portfolio here as an example.
So here’s my portfolio mid-September and I’ve actually got two cryptocurrency accounts on Coinbase and BlockFi. Since I can’t buy on BlockFi through my Iowa bank account, I buy on Coinbase and then transfer some of my crypto over to BlockFi to earn interest on my holdings.
I have just over $400,000 in five cryptocurrencies along with some stablecoins to earn interest on BlockFi. The rough percentages are around 50% in Ethereum, 35% in Bitcoin, 7% in Polygon MATIC, 3% in AAVE and 2% in Cardano. Now these aren’t my target percentages. Since I more recently started investing in the smaller altcoins, I’m still building my position in those. I plan on investing more in the altcoins until that Bitcoin percentage is closer to 25% and Ethereum maybe around 30% of the portfolio.
Using the first strategy around goals, and this is the one I personally prefer because it’s so much more defined…it’s not that uncertainty of taking profits and worrying if you’re selling too early, it’s not the fear that your investments will never reach those price targets. You know exactly how much you need, how much risk you need to take and that’s when you take profits.
That $400,000 crypto portfolio is in addition to about $1.7 million in stocks and bonds along with an additional $300,000 in real estate. I’ve set a goal of $5 million by the time I’m 55 years old in ten years, and that’s from just the current portfolio, not from additional deposits.
And like we outlined in that first strategy, this isn’t just some number I pulled out my ass but an exercise in goal-making, visualization and understanding how much those goals are going to cost.
Stick to Your Goals, Visualize and Stay Motivated
Nation, if you get one thing from the video, please remember and do not neglect this part. This idea of turning your dreams into goals, turning those goals into a mental picture and using that to know how much you need and to motivate you is priceless. This right here is going to give you a destination and make sure you reach it!
So if I assume that stock and real estate portfolio will grow at an average 6% a year then the $2 million grows to just over $3.5 million at the end of 10 years. You can use an online calculator to find this or just type in a calculator one plus the annual return you’re estimating, so here I’m using 1.06, and then this x-to-the-y key which is the exponent, and the number of years. So 1.06 exponent 10 is 1.79 times my starting investment.
That means I need my $400,000 crypto portfolio to grow to about $1.4 million over that ten years. But this isn’t as simple as just finding the annual return over that whole decade because I’m assuming cryptocurrencies prices will increase quickly and I can sell after a few years and then just collect that 6% interest for the rest of the time.
So if I assume my crypto will reach target prices within three to five years and I can then sell and be able to collect 6% annual interest after that, it really means I only need the crypto portfolio to grow to about $1 million or a 150% return from here.
I know this is a lot of math and if you don’t nerd out on this stuff like I do, you’re probably a little cross-eyed by now. We’ve still got those other two strategies I’ll show you how to use next but give this one a chance because it really does take the stress and guess-work out of investing.
But if we apply that 150% return needed to each of these cryptocurrencies gives me target prices of around $120,000 for bitcoin, $8,600 for Ethereum, $6 each for Cardana ADA, $917 for AAVE and $3.40 for MATIC.
Now I wouldn’t necessarily sell if one or two of these cryptos hit their target price because we’re going on a portfolio-wide goal. And even when the portfolio reaches that million-dollar goal, I probably still wouldn’t sell everything but would combine this strategy with the other two to then take profits and lower my risk.
Wow, so that was a long run-through on that first strategy but the other two are more self-explanatory. For that second strategy, taking some profits on the way up, I don’t want to start taking profits too quickly because like we’ll see in the price targets next, I do think cryptocurrency prices can go much higher over the next few years.
Here I would probably wait for each of these cryptocurrencies to run another sixty-percent from the current prices before even thinking about taking profits. That would mean bitcoin around $75,000; Ethereum at $5,500; MATIC at $2.17; AAVE just under $600 each and Cardano at $3.80 per token.
And for a couple of these, the MATIC and AAVE, that wouldn’t even be new all-time highs but I like that point for starting to take some profits, especially if they get there quickly by the end of the year or early next. Like we outlined earlier, I might sell 10% of my portfolio each month over three to five months to take advantage of those higher prices and wait for a selloff.
Again, with any of these strategies, I’m not necessarily pushing all this money into stocks when I sell cryptocurrencies but transferring it into stablecoins like the USDC to earn higher interest, keep it safe and then use those selloffs and moments of max fear in crypto to buy back in.
Our third strategy used specific price targets for each cryptocurrency and you can see mine for the five I’m holding. Obviously these targets are well above where I would start taking profits in that second strategy but you can still use the two together. I might take some profits as the prices jump but the idea is to still keep a significant amount in the portfolio, waiting for these targets before I really start booking gains.
So even if I start taking profits on the way up, I would still keep maybe 50% of my current portfolio invested. If the cryptos reach these targets within the next few years, that’s when I would take the most of the rest out and that would align pretty closely with my goal from the first strategy as well.
Read the Entire Investing in Cryptocurrency Series