The Art Of The Perfect Crypto Exit

Everyone wants to be able to get into the crypto world at the right time so that they don’t miss out on the next viral wave, but what about the other side of the coin?? Getting out early is something that many will warn you against, and yet if you stay in too long, you could lose what you thought you were taking to the bank. The key is to figure out how to master the art of the perfect crypto exit, and for that, you need to be able to see the bigger picture. 

To make sure that you’re never left behind or pushed out of the loop, we’ve created a comprehensive guide that covers everything you need to know. 

Check The Future Of The Cryptocurrency? Project 

Cryptocurrencies are not a one-and-done venture — they need to continually grow and evolve, much the same as fiat currencies need to. What many enthusiastic buyers and investors forget, however, is that they need to monitor more than just the current value of crypto. If you step back and think of the currency as a project or business, it will help you to think about things more rationally. For example, imagine that you discover one or more of the following: 

• The cryptocurrency? fundamentally lacks development

• The pace of development has slowed markedly in recent months

• There is a large amount of negative news surrounding the coins 

• The user community seems to have taken an unhealthy direction 

All of these will eventually impact the value of the cryptocurrency? in a highly negative way, but the drop in value may not have occurred just yet. By considering the background factors in this way, you give yourself access to the context around the coin?. Only then can you accurately judge whether or not it is worth sticking with or exiting. 

Assess Market Top Indicators

Bearish chart patterns are things you simply cannot afford to miss, as they provide strong evidence that the market is about to contract, or that the contraction has already started. And because nothing will go up without limits indefinitely, you also need to be aware of overextended periods where the market for the cryptocurrency? is acting irrationally or has been captured by mania. 

Markets that are going cold or that appear to be overheating represent the ideal points to reassess your holdings. A hybrid approach of selling off a pre-determined amount for a profit and then keeping the remainder in the belief that it will appreciate above today’s price could be one way to tackle this. 

Consider Reallocating Resources 

The reallocation of resources is something that can help diversify an investment portfolio just at the point that it looks to be leaning too heavily in one particular direction. Selling off crypto assets to then invest in a different asset class is one way you could go about this. Websites such as ThinkMarkets are brokers for a range of different assets, allowing users to manage a diverse portfolio in one place. Another would be to simply reinvest a percentage of your profits in emerging coins and meme coins. 

It’s also important to note that achieving diversity in terms of your holdings is not as simple as simply buying up a range of different assets. Some will be more heavily linked to one another than others, and nothing will ever be 100% independent due to the interconnected nature of global trade. Having this last point in mind will help you to strategically diversify in a way that spreads your risk profile appropriately. 

Factor In The Tax Benefits 

Crypto is an appreciating asset, and that means you may need to pay tax on the profits any sale or sell-off generates. The important point to note here is that if you strategically exit your position over more than 12 months, you can reduce the total amount of tax you pay by splitting it across multiple tax years. Even though it may be tempting to sell off everything without delay, you will actually end up with less than if the withdrawals had been staggered. 

The possible downside of staggering your sales in this way is that you will not be able to lock in today’s price when you come to sell again early in the next tax year. There is, of course, an element of risk here, and one that needs to be assessed by looking at the whole economy, not just the last few candles on today’s chart. 

Understand Other Markets

Although we like to think that assets are individual entities and that asset classes are distinct categories whose behavior never overlaps, they are anything but in reality. You only have to look at shifts in common forex signals to see that what impacts one part of the economy can impact another, and it doesn’t matter for the purposes of this guide whether or not you can provide a quantitative link or not. Instead, think about things from the point of view of common sense as follows: 

• Central banks set interest rates 

• Interest rates impact the price of borrowing 

• Higher cost of borrowing reduces consumer spending

• Consumers with less fiat currency still have to pay their rent 

• They may look to close higher-risk crypto positions 

• A sell-off of a coin? can set up a run and drop the value 

• A sudden drop in value can lead to a loss of confidence 

• More people pull out after hearing the news, and the coin? crashes 

This is not to say that you will lose your money in crypto — there are plenty of savvy investors who prove this wrong — but it does mean that you need to be aware of how the economy as a whole is operating. There can very easily be a chain reaction that filters through a range of markets and asset classes, and if you don’t see it coming, you will have little or no time to react. 

Create A Robust Strategy

The first thing to consider is to set up a trailing stop-loss so that the value of your holding cannot dip below a preset value. This will give you a degree of security and help you to have a little more breathing space if you’re looking to do more analysis before a complete sell-off of your cryptocurrency?. 

A common second step is to adopt a house money strategy in which you take out enough profits to cover the cost of your initial investment. With this money safely banked, you can then decide what you want to do with the remaining profits that are invested. Setting a fixed percentage that you will withdraw on a regular basis can help to create a more systematic approach as you look to engineer a prolonged exit that could be highly lucrative. 

Conclusion 

Even though nothing is 100% certain in the world of investments, you can significantly reduce your risk exposure by structuring a suitable exit strategy. By analysing the global markets, not just the crypto space, you can give yourself more data to work with, allowing you to spot emerging patterns and trends before the crowd. It could also show you that there are emerging asset classes or traditional asset classes that you could take out positions in with a portion of your crypto profits. 

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