In crypto, you never make any profit until you sell. It’s all unrealised gains as long as you continue to HODL. And the market can take it back at any time.
If you want to make actual money in this space, then you must learn to take profit into stablecoins or fiat to spend or put into more stable investments.
In this post, I will share with you everything you need to know about taking profits in crypto while protecting and growing your wealth.
Why taking profits in crypto is so hard
If you ask any of the experienced crypto investors and OGs in this space, they’ll tell you that their biggest mistake is not selling and taking profit enough on some of the best investments.
In fact, taking profits is the hardest part of crypto investment, because when you’re in profit, you feel it will continue to rise and you will make more.
1. Greed. The desire to make MORE!
You don’t want to sell yourself short. Questions such as “What if it does another 100% after I sell?” start popping up in your head.
Your mind will be like, “Let’s make another 2x then I will sell”.
You may even have a set target of 5x, 10x, 100x, or whatever and you won’t sell until you reach that target. But the market doesn’t give a f&*k about your arbitrary target.
The market doesn’t even know or care that you have some set target at which to take profit.
Price will move up and down based on the sentiments and mixed emotions of all market participants. And that usually means smarter investors taking profit before you and you never ever reaching your set target.
Or worse even losing a portion or all the previous profits because you didn’t sell. Some of us will even ride it all the way to 5x or 10x and back down to -95%.
Don’t be that guy after reading this post.
2. Over-extending the HODL strategy
Because we prefer to HODL instead of actively trading. “Time in the market is more important than timing the market” (blah blah blah).
After all, historically, “Bitcoin (BTC)” and “Ethereum (ETH)” prices have only gone up almost every year since their launch.
And we naively think that many of the altcoins which we believe have solid fundamentals will produce similar results if you can just HODL.
Almost every other coin besides BTC and ETH, no matter how solid their fundamentals were have produced the exact opposite result so far. Prices decline over time after an initial pump and most never recover.
So, if you manage to get in early to these massive altcoin pumps, make sure to take profit during the run-up or as soon as the dump starts. And move on to the next new coin with great fundamentals.
Or patiently wait for the inevitable major crash or dip to buy back into the previous coin if you still believe in its potential to pump again.
But if you must only invest using the HODL strategy, then BTC and ETH should be your only long-term (2 to 10 years) bet and nothing else.
How to take profits in crypto
If you don’t know how to take profits in crypto, you will be like this guy.
The first step to taking profits in crypto is obviously to first be in profit, and then scale out at your own predefined pace.
You should have a good understanding of the project and why you believe the price can increase from your entry point.
Once you determine what the worst possible and the best possible price of the token should be based on your analysis, then you can find a good entry price and buy.
Then set your profit target and exit strategy based on your research and analysis of the potential of the project.
For example, are you selling everything at once when you reach your target price or if your original thesis is invalidated?
Or are you scaling out gradually starting from a specific price point? Like selling 10% after every 100% price increase for your long-term HODL coins until you’re fully out.
Also, are you buying all at once at a specific price or will you DCA down if the price continues to drop below your original entry? These things are very important and will be based on your conviction.
There is no one-way-fits-all strategy, whatever way you decide is best for you, make sure you define and stick to it no matter what.
But below are the various ways I take profits in crypto.
1. Take profit into stablecoins and lend or stake them to earn interest
I like to take profits into USDC or USDT and lend it or use it to provide liquidity to stablecoin pools on reliable protocols to earn rewards on them.
This way, you’re avoiding volatility and preserving your profit and even earning more on it.
But you’re still exposed to smart contracts and other systemic risks on the lending platform or DEX where you’re providing liquidity.
However, it’s a relatively safe way to book your profit and protect it from market volatility.
The only risks you’re taking with this is that the platform could get hacked or exploited, and the stablecoin company could go bankrupt.
2. Take profit into fiat to spend on your needs and wants
What is the use of the profit you make if not to spend it on yourself and your loved ones? Take some of it and buy the things you need or want in real life.
Take yourself or loved ones on vacations and enjoy your magic internet money before the market takes it all back again.
4. Take profit into fiat to start a business
If you’re trying to build more sustainable wealth, you can take profits in a bull run and use the money to start a traditional or even crypto business.
Whatever business you know you will be successful at, invest your profit in it and you can use the profits from that business to make new smart crypto investments.
Then further reinvest your new crypto investment profits into the business to create your own money machine, you get the idea.
5. Take profit into blue chip coins to HODL or stake to earn rewards
HODL is still the best crypto investment strategy as long as you’re holding established chip coins like BTC, ETH, BNB, etc, with extremely strong network effect.
You can take your profit from altcoins into these blue chips and lend them to earn passive income while holding.
Over time, the prices of these blue chip coins are most likely to increase, thus earning you more profit on your profit.
Signs that you should start selling
- If your original investment thesis is invalidated, admit you’re wrong and take whatever profit you have made or cut your losses, and wait for new confirmations or move on to the next project. Don’t be unnecessarily too stubborn and end up going down with the ship.
- The moment you start taking screenshots of your gains and everyone is screaming how amazing the coin is, that’s the time to start taking profit. Ignore what your brain is saying and SELL. But keep like 10% of your bag in case.
- If the project got hacked, start reducing your exposure immediately. Very few tokens recover from hacks and exploits.
- When you reach your predetermined profit target, sell and take your profit. Don’t get greedy because the price is still going up. The market can turn against you anytime.
The only profit you make in crypto is the one you take out of the market. In the coming bull run, make sure you’re among the ones who sold and took profit.
Don’t roundtrip your bags this time, anon.