How to Take Crypto Profits for Beginners

Lark Davis

Introduction to Selling Crypto

Selling crypto can be challenging, especially when it comes to timing the market. It's harder to sell than to buy, and most people struggle with hitting the sell button and cashing out profits.

When to Sell

  • No one can time the market top perfectly, but it's essential to consider timing when planning a profit strategy.
  • Sell when you reach a target, whether it's a pre-determined price target or a personal financial goal.
  • Sell during bull market froth, when indicators like the Pi-Cycle top indicator, net unrealized profit loss indicator, or M-V-R-V-Z score signal a potential top.
  • Use common sense and look for signs of froth, such as mainstream coverage, altcoins performing exceptionally well, and meme coins/NFTs reaching ridiculous levels.

How to Sell

  • Laddering out: Sell in increments, reducing position and risk while the price is running up.
    • Pros: reduces risk, locks in profits, and manages emotions.
    • Cons: may not take maximum possible gains, makes tax calculations more complicated.
  • Selling all at once: Hit the sell button on the entire position, ideally close to the top.
    • Pros: immediately realizes all profits, reduces complexity, and frees up funds.
    • Cons: increases risk of exiting too early, may lead to FOMO, and turns selling into a high-stakes emotional gamble.

Why to Sell

  • Lock in gains: Crypto is a volatile asset class, and profits can be wiped away quickly.
  • Rebalance portfolio: Rebalance towards traditional assets before the crypto market falls into a bear market.
  • Achieve financial goals: If crypto profits can change your life, take them and change your life.
  • Reinvest in new opportunities: Take profits and free up capital to invest in new things.

What to Do with Profits

  • Diversify away from crypto: Reinvest in traditional assets, such as stocks, bonds, real estate, or gold.
  • Hold stable coins: Lock in gains, but keep funds in the crypto market, ready to take advantage of opportunities.
  • Reallocate during the bear market: Buy favorite crypto coins again, and run the whole cycle again.

Taxes on Crypto Profits

  • Crypto profits are subject to capital gains tax in most jurisdictions.
  • Losses can be used to offset gains, and tax allowances may apply.
  • Consider short-term and long-term gains, and consult a tax professional for specific advice.
  • Use specialized crypto tax software or consult a crypto-experienced accountant to make the process easier.