Home Advice How to Know When to Use Your Cryptocurrency

How to Know When to Use Your Cryptocurrency

Purchasing your first units of cryptocurrency is easy. Knowing when you should sell or otherwise spend your crypto, not so much. The decision to get rid of your crypto depends on your overall investment goals and what you’re looking to gain from your trading activity. Are you thinking to yourself, should I sell my investments now? If so, here are a few considerations to make so that you know when it’s the right time to use your cryptocurrency.

The costs to sell your crypto won’t exceed the profits that you’ve made.

One of the most important considerations to make if you’re thinking about selling is whether or not the costs of your sale will exceed the profits that you made. One of the most significant costs to pay attention to is cryptocurrency exchange fees.

Whether you’re using Coinbase, Gemini, Binance, or Kraken, all crypto exchanges come with fees that traders are charged with whenever they buy and sell crypto. If these fees take a significant portion of your profits, it may not be worth selling right now (or on that platform at all). This is why it’s essential to pay attention to crypto exchange reviews when you first join a trading platform.

Another cost that you may be unfamiliar with is crypto taxes. Whether you’re trading Ethereum, Dogecoin, or Litecoin, all of these assets are treated similarly to stocks and other assets by the government. This means that, when you sell, this sale is a taxable event. If you sell within a year of purchasing your assets, you’re subject to short-term capital gains taxes. If you sell after a year of acquiring your assets, you get charged far less as you’re subject to long-term capital gains taxes. All of these additional charges should be factored into your decision to sell your digital currency.

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Photo by Aleksi Räisä on Unsplash

You believe that the asset has risen to its highest point and may dip.

The cryptocurrency market is volatile, which means that you can see significant losses in a matter of hours. Even more importantly, the cryptocurrency market operates 24/7. Should news break that doesn’t bode well for cryptocurrency, the price of your crypto assets can crash overnight. If you see the price of your crypto assets rise exponentially and you don’t wish to take the chance that they could lose value, now might be the best time to sell them off or exchange them for a stable coin. When it comes to investing, it’s better to be safe than sorry.

You’ve seen significant gains and want to reinvest your profits back into your portfolio.

Another situation in which you may want to sell cryptocurrency is if you’ve seen massive gains and want to reinvest the cash back into your crypto portfolio. Once you make the sale, you can keep the funds in your fiat currency exchange wallet or transfer them to your bank account, wait until the price of your assets drops, and reinvest the profits back into them. Just remember that there are no guarantees when it comes to crypto investing!

Cryptocurrency may be fun and novel, but it’s still an investment nonetheless. Choosing to sell off your assets requires careful thought and consideration. If you’re looking for some guidance on when might be the best time to sell the contents of your crypto wallet and convert it to fiat money, the considerations above will tell you more about when maybe the best time to sell. As long as you do your due diligence and look into all of the factors you should be weighing, you should be able to sell with confidence.

Featured Photo by JESHOOTS.COM on Unsplash

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