The Big Question: Should You Sell or Hold During a Market Correction
When to sell something you love is arguably one of the hardest things to figure out when investing, even more so with speculative investments in cryptocurrency. No one really knows what's going to happen in just five or ten years because most of this space is brand new.
As I've been watching the correction today and thinking about experienced traders taking profits, I've been asking myself:
"Why haven't you sold anything yet? Why are you just watching the value of your portfolio go down?"
So I started to have a little internal dialogue about this which I thought you might enjoy also. It goes something like this:
- Do I need to pay off any debt right now?
- Do I need fiat currency for anything right now or within the next year or so?
- Not really. I still cut myself a check from my company every two weeks, and I've built up a liquid emergency fund my wife and I are happy with.
- If I sell now, will I lock in a loss?
- Thankfully, no. I feel like this is always a bad move unless...
- Is the crypto currency I'm considering selling soon to be a dead coin? Is the dev team gone or is it about to be delisted from major exchanges?
- In this case, yes, I should cut my losses and sell.
- Would I ever consider buying the cryptocurrencies I have now at higher prices?
- I think this is a really good, really important question. Would I buy bitcoin (as an example) at, say, $5,000? If I truly believed it would go up to $10k, $50k, $100k or more, than yeah, sure I would buy. When I ask this question of my current favorite cryptocurrencies (Bitcoin, BitShares, and STEEM), I still think they are undervalued in the long term so yes, I would continue to buy them in the future at higher prices. The same might be said for other currencies I hold and like such Ethereum, PIVX, Stratis, Waves, DigiByte, MaidSafe, Swarm City Token, LBRY Credits and others. I think they have potential, though it may take quite some time before it's fully realized. If I sold now, it seems silly to just buy again later at higher prices.
- Am I dedicated to selling now and then buying back later at a lower price, trying to catch the falling knife?
- This, I think, is the strongest argument for selling during a market correction (assuming you don't need the money and are long cryptocurrency, which I certainly am). Why not sell high and buy low? It sounds great, but... I'm just not that great at telling the future or timing the market. When bitcoin went from $1,200 down to $250 in 2014, I didn't sell. At one point I sold some, but then it started to go up again, and I bought right back in. I was too emotionally connected. I think cryptocurrency is the future, and I don't want to be on the sidelines trying to buy back in at higher prices later. At the same time, if I had sold at the top and bought near the bottom, I'd have a heck of a lot more cryptocurrency than I do right now. This is a strong argument to sell and then re-buy later.
That last point is the one I'm wrestling with right now. It involves risk, time, effort, attention, and some stress. Is it worth it? If selling and re-buying could increase my holdings by 10%, 30%, 50% or more, is it worth it?
For me, this most recent bull run shows me things can go up very, very quickly. Anything less than 50% after this run doesn't seem like much of a gain. There's also the concept of "shaking out weak hands" to consider. Often times whales will destroy a market, punishing the price using their extensive currency holdings until everyone who isn't invested long term sells. Then they scoop it all up cheap and enjoy new all time highs with more than they started with.
My portfolio today is already seeing some bounces back up...
...but are those just dead cat bounces?
Where are you with this internal dialogue?
When markets bounce around, do you sell or hold and why?
This is not financial advice, it's just a conversation.
This post was created with ChainBB for the ChainBB Cryptocurrency Forum which @jesta recently created. Portions of the payouts will automatically support that project.
Saw this today and thought of this post:
We've already recovered from the "crash" and then some. :)
Side note, ChainBB is getting active! I wrote this post there and am excited to see others getting onboard as well.
You can view this post there. Pretty neat stuff going on in the STEEM ecosystem.
Sounds like you have things lined up nicely. The only problem with being in MANY holding is that you end up with a few on the exchange. I don't totally trust the exchange and I don't want 60 wallets installed on my PC, so after a while i shave some off the top and put into Bitcoin & Eth, that way if the exchange goes down in flames, i won't have a huge loss. I would like to stay even more diversified on the exchange, but just don't totally trust them at this point. So the one thing I would say is back up dem private keys whenever you can!
Completely agreed. Most of my holdings are in paper wallets (bitcoin) or web wallets (Steemit, BitShares) with keys backed up in multiple places.
Nice, I need to get that bitshares web wallet, tried to run the app on my PC and crashes every time. Keep on holding!
I try to sit with the reality that "corrections are inevitable." I'm really not much of a trader... I tend to just hold until "hard news" or solid trends suggests something has permanently run out of go juice.
I'm not much good at predicting trends in the short run-- not my gig. I work with fundamentals... so the question is fundamentally whether I believe in the future of cryptos, in a broad sense... and I can emphatically say yes, independently of pricing.
On a more "local" level, Steem has risen recently, but still is only at about 1/3 of its former high... which to my non-expert eye suggests we're 200% from anything that even resembles the irrational euphoria preceding a major crash.
In general, when I start feeling "anxious" about markets I'll sometimes activate an "exposure limit." I'll decide what amount I'm in for (USD equivalent) and profit take any significant amounts that build above that... Sure, it reduces my gains but it's easier to sleep at night when things get super volatile.
I like the sound of that!
I was just talking with @gargon about that yesterday...
First of all, I'm glad about number 1 which a lot of people sadly struggle with. I'm in the same situation that I don't need access right away, but still don't know if the right call is to hold.
I sold just a percentage in case there's a correction to buy back.. Don't know what the smart call is though.
Excellent point and thanks for taking the time to write this post, it's a very good question.
Thanks Alien! I always appreciate your comments. I think selling a percentage makes sense. I've heard people talking about the 3rd's rule, which is where you do buys and sells in thirds. Makes sense, I guess.
When I've done things right, it feels great, but it also feels like gambling. Sometimes I look at the amount of money made, and I think, "Is that all? Was that worth it?"
That's a great question! What I do first thing is take out the initial money invested, this way removing the pressure of gambling, whatever goes up and down, I didn't (technically) invested anything anymore.
Personally, it helps me make better decision as I remove elements that might affect my decision making..
Then there is what you said, "is it all worth it" that depends on your why, why do you spend time learning about that, for the future, for your family..etc whatever your "why" is.
Plus, if you make good decisions and "luck" or the events or whatever you can't control doesn't pan out, you won't be filled with regrets I think,
That being said, I think the outlook is really great for cryptos vis a vis the next few years.
Yeah, I've done that with PIVX already. All the PIVX I own is profit and I probably should have sold to re-enter at a lower level, but... I just haven't been able to. Maybe I just like staking. :)
So much comes back to our why. For me, at this stage in my life, my why involves supporting projects I think will make a big positive impact on the future while also (hopefully) becoming financially free in the process at levels I've never known.
The only regrets I think I'd face would be if I sold something I believed in and then bought it back higher or just watched it go be successful without me.
Yeah that risk always exist.. Maybe by keeping a stake no matter what in the things you believe in will be the right call I think.
But yeah, there is always the gambling element since no one really knows. Part of life I guess, chance that we can't control.
Great WHY btw. I hope you keep reaching those levels man!
This is either 7, or 6A
7 ) What if you get out of cryptocurrencies into cash, just as a black swan hits. And I don't mean cash in hand, I mean cash in a bank, where they will lock it up while you watch it disappear. Just like MFGlobal.
If you are good at trading, and can emotionally handle the rollercoaster, and you have money(s) you can lose, then go for it.
Else, it is often just better to put your time and effort into other opportunities. (like writing blog posts) This will inevitably gain your more than just a pile of coins.
I tell people now and again to google "bank bail-ins" and how their deposits don't actually belong to them. Most don't get it.
I'm certainly enjoying the writing blog posts part and the interactions with the community. :)
I try to talk about MFGlobal. I tell people how lots lost their money... and people say, well, that is what happens when you gamble on the stock market... and I tell them no, it was in segregated account, one that is supposed to be more sacred than even a savings account... and they just don't believe me.
Then I tell them that people who stored gold in the vault didn't get all their gold back.
You are in a great place right now as far as being debt free , having an emergency fund and income still coming in. I would hold for the long haul, It is my opinion that bitcoin is the strongest and will be around for a long time and will be very valuable years from now. There are so many people that are dreaming of being in the position you are in right now. Great post and thanks for sharing. Cheers
Thank you! I agree, bitcoin is the strongest and hopefully it will be improved soon with segwit and 2MB blocks to enable it to scale further. At the same time, even given it's network effect and head start, it's not completely out of the real of possibility that some altcoin will get just the right backers and marketing spin to become a real threat to it.
So far, I'm holding. I can imagine buying back in later at higher prices and that gives me pause.
Very good article. Timing in trading is everything and technical analysis is far of being a science.
Since you mention Pivix. What do you think of it? It has been hit hard lately.
Upvoted!
It has, but it's moving now! I think it has a future. All my PIVX are just profits, but I'm staking them and earning more once in a while.
I think that is the hardest thing to not "fall in love" with a stock or in this case a crypto. Of course, if I had not cheated on Bitcoin a few years ago and stuck it out, I would be in better shape today.
I agree. It's hard for me not to fall in love. I recognize some of my own biases, so I think that's why I've been happy with just holding
I like buying and selling. I'm not always the best at it but it keeps me entertained. Unless there is some kind of market there is not much incentive to keep a block chain going.
Sometimes I like to think about what would happen if everyone acted in a certain way. If everyone just bought and held there would be no sellers. Without the potential for movement and exchange a price is hard to find.
In a way selling your cryptocoins is some other person's ticket to get into the market. In my opinion playing well with other fiat currencies through trading is a good way of improving many lives around the globe. To me, it is much better than hording it unless the price is really going down and your a whale dumping on the market. It is also better than cashing out and buying up precious metals or other scarce resources for hording.
If your trading Steem for BTC either way what your holding is valuable so you might as well do some trading if you ask me. Sometimes cashing out helps pay the bills too but I would retain enough so that your not kicking yourself later for not holding on to more.
I do agree, trading increases liquidity, but there's quite a bit of that now. I'd like to see more liquidity at Open Ledger, so I do try to buy/sell there when I can.