Bitcoin’s recent growth which has reached over 81,000 has brought the talk to the table concerning the future of the cryptocurrency and what strategies investors can apply for better returns. Looking at the situation, this is a milestone worth the attention of not only novice investors but even the experienced ones who might be asking a very important question: Would it be better to hold on with my Bitcoins, balance my portfolio or sell to make a profit?
The Bitcoin Rallies and Apparently Seem Persistent
To begin with, the recent spike in the price value of Bitcoin should not be construed as mere hysteria or the bullish trend or talk of the town rather it is triggered by several factors that underpin the bullish trend. First and foremost, bitcoin was first embraced by an institutional investor which triggered the bull run. Increasing appeal brings us more confidence as institutions widen their exposure into the market. In addition, the halving cycle of Bitcoin, which has been apparent before the bull run largely influences this bullish trend. More and more people are starting to see Bitcoin as a valid hedge against inflation and other crises which will only drive the demand upwards.
Looking for Your Returns on Investment
The prices for bitcoin being set at new records usually prompts masses of investors who have previously assumed their investments were inactive, to track the performance of the portfolio and assess whether the asset has met its objective. For early adopters or those who bought Bitcoin at a reasonable price, return on their investments may be appreciated owing to the fact that it’s time to sell.
While price action may influence your decision in the short term, the decision to hold or sell assets should always take into account your individual risk appetite, investment goals and overall portfolio strategy in the long run.
Here are some of the questions that need consideration:
- Do you expect volatility in the near term and are you willing to brace for it?
- What role does your investment in Bitcoin have in your holistic financial plan?
- Are you nearing a situation that will make it wise to realize profits from the investment?
Should You Hold or Rebalance Your Strategy?
1. Long-term Holders / “HODLers”: Investors who take bitcoin as a long-term holding investment or expect bitcoin to appreciate even further in value can choose to stay on. For them, bitcoin is simply “digital gold”, something that can store value and purchasing power. If instead risk tolerance is high and time perspective is long-term, then holding can be beneficial. The reasoning is simple: there’s only a limited number of bitcoins (21 million) so over time its value has the potential of appreciating, and benefitting those who have the patience to wait it out.
2. Profiting: For those who have used these price levels to gain some positions, partial selling of the portfolio is a viable option. This way, one can sell some of his/her shares to take advantage of the price rise while still holding some market position. Cutting Loose a portion offers liquidity so that other investment opportunities or present needs may be catered for.
3. Revisiting Your Portfolio: When Bitcoin’s price growth has resulted in excess concentration in that particular cryptocurrency, there is a case for change. Due to its nature, cryptocurrency is a highly speculative asset class. too much concentration would only raise the risk exposure. Establishing other asset classes makes it possible to guard the portfolio from unfavorable market conditions, leading to a more optimal risk-return ratio.
Conclusion
As the price of Bitcoin token elevates further into new levels, it becomes important that a clear understanding of one’s investment objectives, risk tolerance and outlook of the market is critical. Although a few people can still hold their hopes waiting for a further price spike, others will simply be working to readjust their portfolio or take some profits. One thing to keep in mind is that the price of bitcoin can be very volatile and sharply moves either upwards or downwards, so decisions must be made using logic not market frenzy.
Irrespective of the decision so as to either stay or modify the investments, being on the lookout related to investment options in line with long term financial planning will put you in a stronger position while undertaking investment in the uncertain world of cryptocurrencies.
