My crypto exit strategy
Many new investors don’t have a plan when it comes to selling or cashing out their bought crypto’s. The absence of an exit strategy may result in taking premature profits or in unwillingly becoming a “hodler” (hold on for dear life) of an altcoin. If you are new to trading cryptocurrencies or shares, this might be the first time you are asking yourself ‘‘Do I hold or sell my cryptocurrencies?’’, or ‘’What is the best moment to sell?’’. These questions can be hard to answer even for experts.
The problem:
it’s very important to take the profits out, that’s when you realize gains, if you only have an altcoin fluctuating up and down, that’s not technically something you can spend right now, or use it in general, so you want to allocate part of your gains to tangible assets or to an alternative investment at some point, to actually realize your gains.
That’s very important, especially when investing a significant part of your net worth. In contrast to leaving your money invested in crypto for longer, if that’s a small portion of your overall net worth.
The solution:
After checking lots of information from the “pros” I schematized an exit strategy where you can slowly take out your profits and at the same time keep some of your money invested in crypto.
This way, your gains won’t be only numbers, you will be able to see your profits, and use them and still have your money invested in crypto in case one of your altcoins actually goes to the moon.
Investing in crypto it’s a very vague meaning, there are thousands of coins to invest in, but overall, if you’re investing in one coin or another, we still characterize it as investing in crypto. So when you cash out the gains from a specific coin, and your goal is to invest this money again, you should consider investing in something else other than crypto, even if you look to invest in another coin, in order to diversify your investments. Most altcoins follow the same cycles of bullish and bear markets, so diversifying your investments in different coins is not really helpful if you look to place yourself in a safe position.
When to cash out:
It’s very bad to choose just an arbitrary date to cash out part of the investment, or a time frame, it’s more important to choose a target price.
Because the crypto market it’s so volatile you should cash out your profits in every opportunity.
The first part of my strategy it’s what I call “Daily Cash Out". For every day your crypto goes up, you cash out a small portion of your coins.
You need to pick the same time every day to check the market and sell part of your coins according to the following table:
Daily Cash Out Strategy:
If the coin goes up by 2%-5% take out 1%
If the coin goes up by 6%-10% take out 2%
If the coin goes up by 11%-15% take out 3%
If the coin goes up by 16%-20% take out 4%
If the coin goes up by 21%-25% take out 5%
If the coin goes up by 26%-30% take out 6%
And so on.
You should only use the daily Cash Out strategy if the value of the coin is higher than when it was bought originally.
When selling cryptocurrencies to realize your gains, you need to apply the percentage over the whole amount of coins. You can increase the amount of money that you are cashing out if you want to get back faster the amount of money originally invested.
Then comes the second part of the strategy:
Set up Goals.
For every altcoin you own you should set up a target price to cash out, based on your realistic prediction and overall goal. See the table below for reference:
X-Altcoin allocation:
10% — Swing Trading — Day trading.
20% — Sell at 2x
20% — Sell at 5x
50% — Staking / Long-term HODL.
Another big reason why you should take out the profits and don’t just hold for the long run, it’s simply because you want to use every opportunity in the global cryptocurrency market. Even in the bull market, big crashes are expected, instead of panicking you need to focus on finding great opportunities and buying dips.
For that, you need to have stable coins or cash ready to be used. Day trading is a good option to take advantage of crashes and dips. You can day trade with a small portion of your overall crypto investment. As the table indicates, I set aside 10% for day trading purposes. It’s a decent amount to play with and be safe at the same time, in case something happens. Day trading is only advised if you are on top of the crypto market and have a basic understanding of technical analysis.
I accumulated a decent amount of money cashing out profits, now what?
If the money you have invested in crypto is a big part of your net worth, you should send back the profits into your bank account, and eventually, invest in other tangible assets in order to diversify your investments.
But if the money invested in crypto is a small portion of your net worth and investment portfolio, then you can feel more comfortable reinvesting in other altcoins other than the ones you own.
Final thoughts:
When the internet was created nobody could imagine being able to order a pizza with it. The things we will be able to do with blockchain and cryptocurrency are unimaginable. The future will be full of blockchains and cryptocurrencies. It is better to familiarize ourselves with these before they go mainstream.
But there are many projects that are solving very interesting problems already. There are many great developers who are breaking the barriers of technology. We are indeed living in a very special time. The monetary benefits are only a pleasant side effect.
My intention is by no way to create a cult of loyal followers who blindly follow my strategy. I am still learning myself and I’m much more interested in sharing my experience and research. Only this week I sold out part of my position only to miss another huge jump yesterday. If you had blindly copied me, then you would also have missed out.
BY SHLOMO FRIDMAN — Crypto enthusiastic, investor, and crypto analyst.