This Simple Crypto Investing Mistake Cost Me $200

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  • If you no longer believe in an investment or your original rationale for buying no longer holds true, it is probably time to move on.
  • Timing the market is almost impossible to do as nobody can predict the future.
  • While it's important to avoid panic selling, there can be scenarios where it makes sense to sell an investment.

When you lose faith in a project, it could be time to sell.

We talk a lot about the dangers of panic selling, or any type of investment decision that is made quickly and driven by fear. But there are times when it is a good idea to sell your crypto investments -- namely, when you have lost faith in the company or product and don't think it has long-term value.

That's how I lost the $200 I'd originally invested in Terra (LUNA). I knew things weren't right -- I even wrote an article about LUNA's shaky outlook. But I didn't sell as soon as I understood there were significant flaws in the project's plan. As a result, I lost my investment when the whole Terra ecosystem collapsed.

Selling your crypto investments

As a long-term cryptocurrency investor, it isn't always easy to decide whether -- and when -- to sell your coins and tokens. It becomes even more difficult when the whole market is crashing and you're holding on for dear life and waiting for the storm to pass. However, LUNA was different because once I'd done some digging, I didn't see long-term value in the project.

Without rehashing the whole Terra meltdown story, my concerns about LUNA were:

  • The rates on Anchor Protocol's interest-earning accounts were too high and the whole dynamic was not sustainable. Terra was effectively subsidizing the high yields that were attracting people to the platform in the hope that eventually it would be self-sustaining.
  • Terra was based on an algorithmic stablecoin model. Other algorithmic stablecoins had struggled to hold their peg, and I wasn't sure Terra's reserve fund would be enough to protect it. If it lost its peg, there was little there in the way of investor protection and both LUNA and the UST stablecoin could spiral out of control.

Even knowing that, I still hesitated to sell my LUNA coins. I had sold my SushiSwap (SUSHI) months before because I lost faith in the project's leadership and subsequently watched the price go up after I jumped ship. As a result, I was waiting for the best time to sell my LUNA. The trouble? There isn't one -- nobody has a crystal ball and it's almost impossible to time the market.

Taking profits

Another scenario where it may make sense to sell your crypto is when the price has gone up 200% or 300% since you bought it. You may decide to sell part of your investment -- sometimes called taking profits -- and hold the rest in the hope that it increases further. However, this route doesn't work for everybody and usually doesn't make sense for less volatile investments like equities.

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All the same, with the benefit of hindsight, it would have been good to take profits when my coins were worth double what I'd paid for them. But that's easier said than done. Not only is it almost impossible to time the highs and know when to sell, at that point I still thought LUNA was worth holding. We are all investment geniuses with the benefit of hindsight.

I tend to be a buy-and-hold investor. However, I am learning (often the hard way) that the volatility of the crypto market means profit taking can be a valuable strategy, even for long-term investors. That said, we don't have enough price history for crypto to be able to predict what might happen in five or 10 years -- and whether profit taking can beat buy-and-hold investing.

Bottom line

The decision to sell a crypto can be as complicated as the decision to buy crypto in the first place. But if your original investment thesis no longer holds true, it's a big reason to sell. In my case, I no longer thought that LUNA could sustain itself for the long term and couldn't see how it would become a global payments system. Delaying my decision to sell cost me money.

The next time I lose faith in a cryptocurrency project, I will sell immediately rather than attempting to get out at an unspecified "right time." I was luckier than some LUNA and UST holders who lost a lot more money. All the same, there are a lot of better things I could have done with $200 than watch it fall to zero.

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