Welcome to the million dollar question, what’s the best time to exit the markets and take profits on cryptocurrency? This is a question often asked in our community, and something I’ve (Marco) also been thinking about a lot throughout the past couple of weeks, as Bitcoin dropped from $64,000 to $42,000.
Let’s go over my strategy & thoughts together. I’m hoping this post enables you to figure out your own strategy, which we’d love to learn more about in our Telegram community!
What is an exit-strategy?
First, what is an exit strategy? Summarised, an exit-strategy is a plan to sell your positions and take profits on your investments. This plan is typically created either before investing your money, but if you don’t have one in place then I’d suggest you start thinking this through and set target for yourself.
Why do you need an exit-strategy?
An exit strategy is needed because it makes you take out your initial investment and possibly profits. Having an exit strategy provides you mental peace, and is an important part of your risk management strategy.
Summarised, a risk management strategy includes setting take-profit and stop-loss targets for your cryptocurrency positions in advance. So that you’re less subject to FOMO (Fear-of-missing-out) and trade based on emotions rather than rational thoughts.
It allows you to use these profits to either re-invest them in other markets, or to dollar-cost average and buy back cryptocurrency during bearish months. Allowing you to accumulate a new portfolio.
What is my exit-strategy?
That said, what’s my exit-strategy? As I mentioned, this is something I’ve been thinking about for weeks and I’m writing this piece to enable you to follow my thought process and the options I’ve mapped out so far for taking profits at the (hopefully) end of this bull run.
Overall, here are some of my strategies:
- I’ve been writing about BTC.D for months, and painted a clear plan in April, targeting 39% BTC.D by July. A month later, we’re already there. Meaning BTC Dominance is currently at the 2018 low, which is low-key scary to me.
Therefore, I’ve applied the following strategy:
I converted most of my long-term holdings to BTC. I’m not holding the BTC though. I simply aim to be liquid at all times and rather than holding, I’m using the BTC to trade altcoins with a clear trading plan (stop-loss & take-profits set in advance). This allows me to be more agile and diversified, rather than holding my eggs in a few baskets.
- Across the past year, I’ve shared my targets are $8,600 for ETH and $100,000 for BTC by this summer. Once either of these targets are hit, or if BTC were to break $42,000, I’m converting 50% of my portfolio into USDC (temporarily).
The other 50% I’ll continue to trade with.
- Currently, it’s not interesting to purchase a house nor stocks, as markets are sky-high.
I therefore consider cryptocurrency to be the best investment choice of at least my generation (I’m 23 years old).
Taking that into account, I’m diversifying the available USDC across various DeFi platforms & blockchain real estate platforms. For this, I plan to do more research to various DeFi platforms, the yield they offer & how secure these really are. Also with a clear exit/diversifying strategy in mind.
This allows me to be liquid, as I can take out the funds at any time and inject them back into the market. It allows me to generate interest, which I’m not going to get on the bank. And, in my opinion it’s worth the risks as I don’t believe stocks are worth investing into right now.
What is my re-investment strategy?
Besides an exit-strategy, it’s also important to know what you’re going to do with your funds after taking them out of the market.
I’ve explained most of my strategy above. Except for my plans on injecting the 50% of the portfolio (USDC) back into crypto.
In an actual bearish market (upon breaking $42,000), I anticipate Bitcoin bottoms around $29,000-30,000.
I therefore set up the following targets for the 50% of my portfolio:
- $38,000 – inject 20% of available USDC
- $32,000 – inject 40% of available USDC
- $29,500 – inject 20% of available USDC
- $22,500 – inject 20% of available USDC (or at $42,500 after a successful breakout)
The average buy-in price would be: $30,800 per BTC. Which is the overall bottom I have in mind. Rather than timing the bottom, I’d rather apply a dollar-cost average strategy in order to not completely miss out on the buy opportunities provided.
I don’t necessarily plan on exiting the market, as I believe bitcoin & other cryptocurrency provide the best investment opportunity for my generation, compared to real estate and stocks.
Rather than holding mid/long-term positions, I intend to trade more with stop-loss and take-profit targets set in advance, to manage my risks and prevent a large downfall of my portfolio value.
Cash is king. In an actual bear market, I’d like to have cash in hand to further increase the total Bitcoin value of my portfolio. While I wait for the lower targets to hit, I’ll leverage DeFi opportunities to generate passive income.
I’m currently doing research to various DeFi platforms and keep track of their offered yield, in order to make an educated decision on which platforms to use.