In the current bull market, Bitcoin and Altcoins are racing each other. One all-time high (ATH) is chasing the next. If we do not belong to the camp of hardcore hodlers, cortisol and adrenaline levels fueled by FUD (fear, uncertainty & doubt) and FOMO (fear of missing out) can sometimes gain the upper hand and emotions then determine our decisions.
Intuitively, we all know that everything that goes up will come down at some point and before that ideally we would like to cash out at the highest point. But when will this mythical ATH happen? And do we even manage to sell at the right time while we are glued to the price charts like addicts?
The sober and soothing answer for peace of mind and emotional health is: We probably won’t make it. The majority won’t make it to sell at the ATH and if they do, it’s often due to a lot of luck. Therefore, successful investors approach the issue with as little emotion as possible.
A comprehensible plan based on data and facts is half the battle. Second and maybe even more important half is the implementation
Cashing out with a plan — Don’t give FUD and FOMO a chance
First of all, we should consider where the journey can go. For Bitcoin, ATH forecasts of USD 100,000–1,000,000 are in the room. The average value of popular models such as Stock to Flow or the Rainbow Chart are USD 230,000–240,000 for this halving cycle (Halving refers to the number of coins that miners receive for adding new transactions to the blockchain being cut in half — J. Crawley).
Among other things, the models refer to technical analysis and the view of Bitcoin as a rare asset with real production costs. Higher price forecasts are spurred by news of institutional investment in the crypto ecosystem and the global expansion of the money supply through central bank fiat money printing since last March.
You can only decide for yourself how high you think the ATH is based on some key data. A promising strategy is to stagger the exit as well as the entry.
If you are not already buying according to a rational system, answer yourself honestly the question whether you have caught the bottom of each setback with your additional purchases of the last six months. Probably not. After all, humans are remarkably bad at predicting social systems. And that includes the crypto market. So if you didn’t catch the dip, what would be the reason that you can accurately predict the peak?
Selling at 75% of ATH on average is a good and realistic goal.
To do this, you can proceed as follows. First, set the amount of bitcoin you want to sell in this halving cycle. When the price reaches 50% of your ATH forecast, you sell 5%, at 60% of the price you sell 10% and at 75% you sell 50% of the coins and so you proceed. You should consider the same for the altcoins you hold.
These are not rules set in stone, but a starting point that can help you to a successful and stress-free strategy in the bull market. In addition, there is the tax aspect. In the US the tax liability for crypto trading shifts from short-term capital gains tax to the lower long-term capital gains tax after a holding period of 365 days.
Saving taxes should not be the basis of your economic decisions. Those who do nothing at all save the most. But it can make sense to take the holding period into account when deciding to sell and use the favour of the hour, or just wait a little longer.
Personal variables that influence your decision to sell can be factored into the amount of coins you want to sell. 50,000 USD may be worth more to you today to pay off a loan or share a great experience with your loved ones than 1 BTC that may be worth 500,000 USD in 4 years.
Relaxed through the bull market
Surprisingly, many people lose money in the bull market and often time away from the screen, with your partner and friends, in nature or pursuing a hobby lead not only to better sleep but also to better results.
To be able to make optimal decisions even in the euphoria of the hour, an organized overview helps. In the Blockpit application, you can keep track of your purchases and sales in all accounts and save taxes through sensible planning.
Disclaimer: The information provided in this blog post is for general information purposes only. The information was completed to the best of our knowledge and does not claim either correctness or accuracy. For detailed information on crypto regulations, we recommend contacting a certified legal advisor in the respective country. If any questions occur, feel free to contact us on our social media channels.
Originally published at https://blog.blockpit.io on April 2, 2021.