How to take profits in crypto? Taking profits in crypto is important for realizing the gains that you made in this market. If you do not take profits, then you are at risk of losing the unrealized gains that you have made when your investment has increased in price.
A Beginner’s Guide To Taking Crypto Profits and Reinvesting
Crypto investors will have the opportunity to save for future re-investments and to consider what to make of cryptocurrency earnings. Intelligent investment managers know they don’t want to stay on cryptocurrencies long because it could wipe out their gains. Therefore, there is always a good plan of action when crypto wins. Some people may feel tempted to spend some money on an automobile or on other things. It should nevertheless be remembered that the assets they contain tend to devalue over time.
Taking profits in crypto can be a little more complicated compared to selling stock. If only it was as easy as pushing a button to take profits in crypto, then there would be no problem.
Taking profits in crypto requires you to convert your crypto to a stablecoin. Unless you are selling your crypto for cash on a centralized exchange (aka fiat on-ramp), trading your crypto for a stablecoin ensures you have finalized the gains that you have made.
Understanding Stablecoins
A stablecoin is a cryptocurrency that is stable in price and is pegged to a currency such as the US dollar. USDC, DAI, and USDT are popular stablecoins used in the crypto market.
There are other stablecoins as well that can be used outside of these ones. Just be sure to know what compatible stablecoins your can trade your crypto with on the exchange that you are using, whether it would be centralized exchange or decentralized exchange.
To learn more about taking crypto profits, watch our video here.
How do I make a profit from crypto trading?
Taking profits can be hard for those who get greedy and are hoping to have more gains but it is important step to take. It helps to set a target price or to where you will be taking profits. The profits you will make is a result of buying at a lower price than what you are selling it for. Hence why the term buy “low, sell high” is really popular.
Common Mistakes Crypto Investors Make
Diamond Hands
- You can hear this a lot when there are those who tell you to just hold onto your investment no matter what which can only end up hurting you if you never sell. Dollar cost averaging out of an investment would be more ideal when it comes to selling.
Buying the dip
- Buying the dip is not always worthwhile if it is worth waiting longer to enter at a cheaper price. It can also not be a good idea if the crypto is being rug pulled or completely crashes without being able to recover. Dollar cost averaging into an investment would be a better alternative when it comes to buying.
Key Takeaways For Investing In Crypto
- Don’t fall victim to fear of missing out (FOMO) and fear, uncertainty, and doubt (FUD)
- Set clear goals, diversify, and only trade within your means.
- Be ready to ride out the dip or take profits
- You can also set up a strategy to maintain a ratio such as 10% of your holdings will be allocated to stablecoins and maintain that allocation.
Now that you know how to take profits, check out our post How To Convert Crypto To Cash to learn how to cash out your profits.
To learn more about everything crypto, see our Learn section.
