Now That the Prices are Soaring, should You secure profit?
March 24
Author's Note: I started writing this yesterday morning, March 23. However I wasn't able to publish it.
Every Bitcoin Cash HODLers are excited these days because after the long wait the price of Bitcoin Cash is soaring again. At the time of writing the price of BCH increased by $45.17 in the last 24 hours. That's at least a 13% increase.
Screenshot of the March 23 Price chart via CoinDesk
Greetings Bitcoin Cash lovers. This is an exciting time for all of us right? For almost a year now, the price of Bitcoin Cash has been crawling at the bottom of the chart. Now, the prices started to climb up again. It is still nowhere near the highest attained price in the last 52 weeks or 1 year though. The question is, what should we do? Should we keep HODLing everything? Or should we take some profits?
No One Knows What Will Happen Next
Here is one fact. No one knows what will happen to cryptocurrency prices next. In my experience, no one what will happen if the price will continue to climb the next day or even in the next minute or will take a dive.
Looking Back
Last year, I just got discharged from the hospital when the price reached its 52-week-high of $1639.46. If I remember it right, I have just sold some amount to help pay off some debts because of my hospital bills. I was still recovering at that time that I barely even check the prices of cryptocurrency. I was hoping that prices would continue to go up then... but I got disappointed when I finally got to check the price. The price started to take its deep dive. However, I was hard-headed, and having no idea about Elon Musk's tweet, I kept my hope up. But the price kept plummeting.
Screenshot of the 52-week chart via CoinDesk
The following month, the three-month school break started. My BCH earnings were my only means of income during those months. And during those months, the cryptocurrency prices went into a wild roller coaster ride! I could not decide when to sell.
Disclaimer
Before I continue, I want to make this clear. This article is not a bit of financial advice. What I will share with you here is my plan based on my situation and experience. I would even welcome some advice from those who know more.
Two Wallets With Different Purposes.
I have shared with you before that I am using two BCH wallets (Why Am I Using Two Wallets For My BCH?). Each wallet has a purpose.
One is for my savings. That is my Bitcoin.com wallet. This is where I HODL my BCH. Meaning, the amount I send here serves as my savings and soon for investments, so I can make it grow.
The second wallet, which is my coins.ph wallet is my expense wallet. The amount that I send here is intended to be converted to fiat and spent. But I never convert every satoshi to fiat or Philippine Peso right away. In fact, I only converted half of my BCH last month. This is the wallet that I need to manage effectively to maximize my earnings.
Dollar-Cost Averaging or Value Averaging
Last time, I mentioned I am using the concept of Dollar-Cost-Averaging. But I don't think this is the right application. I still need to do some research on Dollar-Cost-averaging and value-averaging. To avoid confusion I will not use both terms in this article.
Maximizing Profit.
Since I plan to spend my BCH in my spending wallet, I want to maximize my profit in that wallet. Several times in the past, I HAD TO sell my earnings during drops because of urgent needs. That's what I want to avoid as much as possible.
Securing Profit.
How do you secure your profit in cryptocurrency? Let's a look at this sample chart so we can visualize the process.
Sample Chart
For the sake of discussion, let's assume you bought 100 units at $18. This means you invested $1800 to start with.
Let's say the price hit its lowest on Day 2 (at $12) and started to go up. Not knowing what would happen, you started to sell 10% of your earnings at Day 4 to secure your profit at $22. This means if the price drops the next day, you have already secured 10%.
10 units x $22 = $220.
Now, what if the price dropped the next day at $20?
You can now use again the $220 to buy 11 units. This means you can gain another unit. However, the price continued to go up. You decided that you will secure your profit every two days. On Day 6, you sold another 10 units at $43.
10 units x $43= $430
On average,
($430+220) /20 =$32.50
That means you sold 20 units for an average price of $32.50
Let's say you missed a temporary peak at $47. But the next day, you sold another 10 units at $44. This will bring up your average to $36.33.
The total value of what you have now is:
Fiat = $440+$430+$220 = $1,090
Cryptocurrency = 70 units X $44 = $3,080
At this point, if the price drops back to $12, which will be equivalent to $840. You still have a secured profit.
$840 + $1,090= $1,930. which is $130 more than your initial investment.
The next day the price continued to drop to $39.
The following day, the price dropped further to $30. Is it now a good time to buy? I would buy about 10 units.
Why only 10? The price might drop further the next day. Who knows? If it continues to drop, I will buy another 5 or 10 units. I will continue buying in small quantities until the price goes up again.
Even if you 30 units at $30, I will spend only $900. You will have 100 units again, but you now have an extra $190 dollars. You can use this to buy more units or take it as your profit.
In Closing
Selling in small portions is one way I can think of in securing profit in a volatile market. And cryptocurrency is, I think, the most volatile market there is. It's also the best way to dampen the effect of volatility.
There are other factors to consider though to make this work.
planning - you need to make a plan on how to implement this. It does not need to be a perfect plan. You can adjust the plan along the way
monitoring - monitoring is crucial. How else will you know if you are losing or gaining?
consistency - You to stick to your plan unless you need to adjust your plans.
discipline - emotions will play a great deal in your decision-making, especially greed and fear. Self-discipline is a must to counter these emotions.
I'm using this concept to maximize my BCH in my expense wallet. Again, I have a savings or HODLing wallet where I am keeping my BCH for a long time.
What do you think about this?
Live a productive life.
Thanks for reading.
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I keep all my bch in at staking, I hoping that it will generate a little every day. even if the currency will be down still i have a little increase on staking process.