When should you sell your Bitcoin?

Posted: 20 October 2021 12:43 pm
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With Bitcoin poised to set a new price record, is it time to sell? Here's what to consider.

Bitcoin is on the move again, currently trading at AUD$85,878, only a whisper away from its all-time-high price of AUD$86,468.

The latest rally has been spurred by a steady stream of headlines, including the adoption of BTC as an official currency in El Salvador and Twitter implementing BTC tipping. Most recently, we've seen the launch of a Bitcoin-related ETF in the US.

With so much positive news driving prices higher, many investors are wondering if now is the right time to cash out their Bitcoin. While everyone's circumstances are different, here are 2 approaches you should consider if you want to start cashing in.

Both these approaches have a common feature: You should set a price target for when you want to sell. That way, you've got a clear goal and are less likely to make emotional decisions.

Option 1. Dollar-cost averaging

Dollar-cost averaging (DCA) is a tried and tested investment strategy that involves making small regular purchases of an asset.

In classic dollar-cost averaging, you pick a fixed schedule, whether daily, weekly or monthly, then buy the same amount of Bitcoin every time, no matter what the price.

This will lower the average cost of your investment, compared to trying to time the highs and lows of the market.

The key point here is that DCA also works for selling. Instead of buying every week (or month), you are selling to a schedule. You pick a price for when you're willing to start selling, then sell when Bitcoin reaches that point.

Let's say you want to start selling your Bitcoin when it gets above $90,000.

As long as it is above your target price, you sell at regular intervals.

For example, you sell $200 of Bitcoin each week the price is above $90,000. You keep doing that on a regular basis while you're above that price.

Instead of dollar-cost averaging in, you are dollar-cost averaging out.

This strategy helps to minimise fear and greed, and lets you set a clear investment plan. You're spreading the risk over time.

Option 2. Sell as a lump sum

The second strategy you can use is to sell once you have reached your investment goal.

First, set a price target, then sell once that target is reached.

This requires a lot of discipline, as it is very easy to be tempted not to sell at all, in the hopes that the price will rise further.

One way to help stop this from happening is to set multiple price targets. This means you are taking profits, while still having the opportunity to enjoy future gains in price.

For example:

  • Sell 30% of your holdings at $100,000
  • Sell 30% at $110,000
  • Sell 30% at $120,000
  • Keep 10% to sell in the future, in case the market really takes off

Whichever approach you take, this is key: Choose a strategy and stick to it. Write it down. Set your target price and make sure you are prepared to follow through with your plan when the time comes. You can't eliminate risk that way, but you will be taking a much more disciplined approach than just second-guessing the market whenever there's movement.

Interested in cryptocurrency? Learn more about the basics with our beginner's guide to Bitcoin, dive deeper by learning about Ethereum and see what blockchain can do with our simple guide to DeFi.


Disclosure: The author owns a range of cryptocurrencies at the time of writing

Image: Getty

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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