The Lifecycle of a Cryptocurrency – Part 4 (Summary and Cashing Out)

Coin Lifecycle Summary

To sum things up, during the first year of its existence a coin should start developing innovative solutions that its creators promised in the whitepaper. The original thread with the coin announcement on BitcoinTalk.org should be at least somewhat active. The coin should be growing a community around it and the transaction volume should gradually be increasing, even though extreme fluctuations are possible.

The community of crypto coins has its own schedules. Some developers work faster and some work slower. Sometimes it takes longer to grow a community and sometimes it happens somewhat quickly. Because of these reasons, you want to make decisions about your investments not by just looking at your watch, but also by taking into consideration major milestones such as new versions of software and revised whitepapers and view everything in context.

Next, a coin would often reach a critical mass. Its name and the idea behind it start slowly propelling into the mainstream. If you create a Google alert for the name of the coin, you will start getting more and more alerts in your mailbox. The chart that depicts the activity will be similar to the chart of bitcoin activity starting from 2012-2013 when bitcoin was gaining popularity.

Reaching a critical mass is not a defined, fixed event. It is something that happens gradually. It is an accumulation of all the signals and factors discussed previously. At the same time, the point of reaching the critical mass is easy to see. That’s when major news outlets, such as Fox, CNN, and others will start mentioning the coin and inviting experts to discuss it. The forums will get an influx of newbie visitors who will be asking all kinds of beginner questions. Most of the visitors will not know much about cryptocurrencies or technology but will be looking for the next big thing.

This point is also when big institutional companies suddenly become interested in the coin and big exchanges want to start trading the coin. The ecosystem starts expanding and the coin reaches a new level.

Price is likely to stay very volatile even at this point because the way mainstream adopters act in the markets can be similar to a pump and dump event. A lot of people hear something on national TV and want to either buy or sell simultaneously.

 

Cashing Out

If your goal is to make some money with cryptocurrencies, you may be wondering about when and how you should be cashing out of your cryptocurrency investments. Many of the people investing in cryptocurrencies hold libertarian beliefs and think that cryptocurrencies will change the world for the better and do everything from limiting the abilities of the nations to go to a war to stopping government abuses in many walks of life. For this reason, many of the cryptocurrency investors choose to hold their investments.

The solution here is simple: you want to set your goals early. Set a target price at which you will sell and set a percentage of your portfolio that you will be willing to sell. Otherwise, it is possible that you will stop thinking rationally and will start dreaming about making tens and hundreds of millions and buying yachts and private plains.

Instead, create a plan the day you invest in a cryptocurrency. Come up with a goal and stick to it. Determine the price at which you will sell that will allow you to meet your financial goals and sell when the coin reaches the price. While there is nothing wrong with keeping some investments in the coin, you do not want to have all the eggs in one basket. This is not a sound investment strategy when it comes to stocks, cryptocurrencies or any other assets. With cryptocurrencies, you are just one hack away from losing a lot, which is why you want to diversify your investments and protect yourself from the risks.

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