When your investments are down a lot with no end in sight, your brain tends to demand that you take action to stop the bleeding.
That's a relevant dynamic to keep in mind if you hold Bitcoin, (BTC +0.26%), Ethereum, (ETH +0.35%), or XRP, (XRP +0.17%) all of which have all fallen sharply from their prices a year ago. As much as you might want to sell those coins, selling them right now is probably not the right choice. Here's why.
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Temptations aren't always logical
It's usually pretty challenging to figure out precisely when to buy cryptocurrency or when to sell it.
In particular, selling your coins after a steep decline delivers immediate emotional relief from the pressure of feeling like your investment was a failure and that it's only going to lose you more of your hard-earned cash. But frequently enough it ends up locking in the worst outcome, and it isn't exactly a sound investing practice to make into a habit.
CRYPTO: BTC
Key Data Points
Consider what's happening right now.
With Bitcoin, U.S. spot Bitcoin exchange-traded funds (ETFs) attracted $458 million in net inflows on March 2, despite deepening and widespread fears of economic or financial contagion stemming from the joint U.S.-Israeli attacks on Iran. Ethereum ETFs, for their part, registered $39 million in inflows on the same day, while XRP's ETFs brought in about $7 million. All of that happened while the Crypto Fear and Greed Index, a meter tracking market sentiment which goes from 1 to 100, sat at 20, near the deep end of the "extreme fear" zone, and close to all-time lows.
In other words, despite the recent history of big price declines, and despite plenty of reasons you could invent for yourself to justify selling, important fundamental metrics are trending strongly in the right direction. Eventually, those trends will help support higher prices for the assets.
CRYPTO: ETH
Key Data Points
When times get tough, stick to the winners
The above is not to imply that every coin deserves equal conviction during a slump.
Bitcoin and Ethereum stand apart from most other cryptocurrencies because they feature structural drivers for demand, stemming from its scarcity in Bitcoin's case, and its utility in paying for decentralized finance (DeFi) applications in Ethereum's case. XRP, while still a crypto major that's worth owning, isn't positioned quite as well as the other two. The coin is marketed as a tool for financial institutions looking to move some of their operations to be settled on the blockchain; even if that goal could deliver a lot of growth if it succeeds, it's simply a smaller target to hit compared to what the other two coins are going for.
CRYPTO: XRP
Key Data Points
But that difference doesn't mean you should panic sell it when the price goes down for a few months.
If you're tempted to sell, you need to ask yourself if the investment thesis you used to justify buying these coins in the first place has changed, or if it's only your mood that's changed, along with the price. Usually, it's the latter, and that argues for continuing to hold.
