With the crypto winter thawing out and the price of Bitcoin (BTC) on the rise, you might want to consider selling some BTC as its price peaks again.
Granted, super hardcore Bitcoin enthusiasts may argue that you should never sell your Bitcoin, but, for the rest of us that do need to take profits into fiat currency once in a while, it’s important to devise a plan for when to sell some BTC.
And a good plan entails understanding the process of how to sell BTC as well as why it might be beneficial to do so.
Why sell BTC?
Bitcoin’s price tends to go through significant peaks and valleys, and we may be approaching another peak in the coming months.
Historically, trends in BTC’s price have revolved around Bitcoin’s halving cycle.
Every four years, the reward for mining blocks on the Bitcoin network is cut in half, which is to say that the amount of BTC issued is halved every four years.
There have been three Bitcoin halvings thus far, and the fourth halving is scheduled to occur in early 2024.
Within approximately a year and a half of Bitcoin’s last three halvings, the price of BTC reached a new all-time high.
And then its price declined significantly for about a year after that, before bouncing back in the following six months and then falling again, right before a new cycle began.
Let’s take a look at this trend using the numbers from the years following Bitcoin’s second halving.
Bitcoin’s second halving took place on July 9, 2016. On that date, BTC’s price was approximately $650.
A year and a half later, on January 9, 2018, BTC’s price rose to about $15,500, while it was back down to just under $4,000 one year later.
Six months later, on July 9, 2019, BTC’s price bounced back up to $12,200 before dropping to about $7,800 six months after that.
We’re currently at a point post Bitcoin’s third halving in which BTC’s price action looks similar to the way it did four years ago, in March 2019, when BTC’s price was in the process of moving from just under $4,000 to just over $12,000.
If BTC’s price bounces over 300% off of its January lows again during this cycle, we may see it close to $50,000 by July.
Please note, though, that past trends are not guaranteed to play out again, and it’s by no means a given that BTC’s price will hit $50,000 in the coming months.
If you do see BTC’s price continue to run in the coming months, though, it might be a good opportunity to take some profits along the way.
When to sell BTC
Timing the market — or selling an asset exactly as its price peaks — is extremely difficult to do.
For this reason, instead of trying to plan a moment in which you make one big sale, you may want to sell small chunks of your BTC holdings as the price of BTC increases.
For example, you could choose to sell 10% of your BTC holdings every time the price of the asset increases by 25%.
If you were to measure this from BTC’s low of about $15,600 in November 2022, that would mean that you’d sell approximately 10% of your holdings every time BTC’s increased in value by about $3,900.
You could think about this like hitting a bunch of singles and doubles instead of trying to just hit one big home run.
It can be quite frustrating and disappointing to expend a lot of mental and emotional energy aiming to hit that home run and then to not do so.
Hitting those singles and doubles is a good way to lock in profits, which can help to preserve your mental health as a crypto investor.
We may be in the early stages of a new crypto bull market.
BTC’s price touched $28,500 on March 20, 2023, up from a low of about $15,600 on November 9, 2022.
If you’re the type of investor who plans to take profits from your Bitcoin holdings into fiat from time to time, we may be entering a period in which it will be profitable for you to do so.
Bitcoin’s price is volatile, and you can capitalize on this volatility if you sell the asset while it’s in an uptrend.
Trying to wait for the perfect moment to sell a big chunk of your holdings is quite difficult, but selling smaller chunks of your holdings as BTC’s price rises is a good way to ensure that you lock in profits in the short term.
Frank Corva is a cryptocurrency writer and analyst for digital assets at Finder. Frank has turned his hobby of studying and writing about crypto into a career with a mission of educating the world about this burgeoning sector of finance.