Cash out or keep holding? Should I sell my crypto?

In digital assets, it's the question of the moment – every hour, every minute, every second: "Should I sell my crypto?"

Seller’s remorse is tough – especially in the volatile crypto market. Whether investors are sitting on profits or holding assets in the red, there’s always the fear of exiting too soon. Calling price tops or bottoms is tricky, and market reversals are always a possibility. On top of that, every crypto sale carries capital gain or loss implications, making exit timing a key tax consideration. Traders rely on various tools to help them decide, but taking a step back to assess all options can help prevent future regrets.

In this guide, we'll tell you what you need to know.

How to know when to sell crypto: Using fundamental and technical analysis in an exit strategy

When crypto investors are unsure about selling a digital asset position – whether it’s when to sell Bitcoin (BTC) or an altcoin – one of the most effective strategies is to take a step back and analyze their holdings. The type of analysis investors use largely depends on their time horizon, with long-term holders favoring fundamental analysis and short-term traders focusing on technical analysis.

Fundamental analysis: Assessing intrinsic value

Fundamental analysis evaluates qualitative and quantitative factors to determine a digital asset’s intrinsic value. Unlike technical analysis – which relies on chart patterns and price action – fundamental analysis examines core aspects such as a project’s underlying technology, real-world use cases, and tokenomics. Additional factors like the development team, governance model, and partnerships also play a crucial role in assessing a cryptocurrency’s long-term potential.

The advantage of fundamental analysis is that it provides an objective assessment of an asset’s value, free from market hype. If a cryptocurrency’s market price is significantly inflated due to speculation, it could indicate that the asset is overbought and due for a correction – potentially signaling a good time to sell. Conversely, if a project demonstrates strong development and adoption, holding through volatility may be the better choice, even if the price has already surged.

Fundamental analysis focuses on the bigger picture, helping investors make well-informed decisions without being swayed by daily price fluctuations. This approach is particularly valuable for long-term investors. However, for those engaged in short-term trading, technical analysis is typically more useful.

Technical analysis: Identifying key price levels

Professional day and swing traders primarily rely on technical analysis, studying price charts, volume patterns, and indicators like the Relative Strength Index (RSI) to identify optimal entry and exit points. Using this data, traders set predefined sell targets, helping them execute trades based on strategy rather than emotion.

By placing sell orders at specific price levels, short-term traders can exit positions automatically, avoiding the need for manual decision-making during volatile market conditions. This method keeps trading disciplined and systematic, reducing the influence of impulse-driven moves.

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Reasons you may want to sell your crypto

Deciding the best time to sell crypto is always a personal choice, but investors often cite a few common reasons for exiting their positions. Regardless of the motivation, it’s important to understand why an asset no longer fits within an overall strategy. Taking the time to define an exit plan helps minimize the risk of making impulsive decisions.

Lack of development in a blockchain project

Just as stock investors look for growth in a company, crypto investors want to see ongoing development in their digital assets. A blockchain project needs continuous innovation and active engagement from its development team to stay competitive and attract users. If the developers behind a cryptocurrency become inactive or stop communicating on social media, it could signal stagnation or even project abandonment. In such cases, investors may consider selling due to concerns over declining value and reduced developer commitment.

More promising investment opportunities

Even if crypto investors are in a profitable position, another asset may offer better growth potential. If someone believes other cryptocurrencies or traditional assets like stocks, precious metals, or ETFs have stronger upside, they might consider reallocating their capital. While swapping one asset for another doesn’t guarantee higher returns, some investors accept the risk in pursuit of better opportunities.

Need money to cover expenses

Unexpected expenses are a part of life. Whether it’s medical bills, car repairs, or an unusually high monthly expense, even the most disciplined savers may need to pull funds from their investments. While committed crypto holders may hesitate to sell, liquidating assets can be a practical solution for covering essential costs or discretionary spending.

Rebalancing an investment portfolio

If investors allocate specific percentages to assets in their portfolio allocation, they may find that certain cryptocurrencies outperform others and exceed their target weight. Regularly rebalancing helps prevent overexposure to a single asset and allows investors to lock in profits from strong performers. Selling a portion of these holdings can help maintain a diversified portfolio by redistributing capital across different positions.

A technical pattern doesn't play out 

Short-term traders rely on price levels and chart patterns to determine entry and exit points for a cryptocurrency. If an expected move fails to materialize, it may indicate a misread pattern or a shift in market sentiment. Rather than holding onto losing positions in hopes of a rebound, many traders use stop-loss orders to limit losses and protect against further downside.

Factors to consider before making a crypto sale

Even if investors have a clear reason for selling a cryptocurrency, they must account for the additional costs and potential impact on their portfolio. Beyond trading fees and taxes, exiting a position can affect long-term profitability.

• Taxes: Every crypto sale (or disposal) is a taxable event, meaning traders must factor in potential tax obligations before determining when to sell crypto profits. If the sale price exceeds the asset’s cost basis, the IRS will apply capital gains taxes. The amount owed depends on multiple factors, including how long the asset was held, the investor’s income bracket, and the chosen cost basis calculation method (FIFO, Spec-ID, HIFO, or LIFO).
• Market volatility: Crypto prices are known for their rapid and unpredictable swings, which can work for or against sellers. Panic selling during a dip might prevent steeper losses, but it could also mean missing a rebound. Having a clear exit strategy with defined profit and loss targets helps navigate this volatility.
• Time horizon: Investors should assess their long-term strategy before selling. Those with a multi-year investment outlook may be less concerned with short-term dips as long as the fundamentals of their holdings remain intact. In contrast, short-term traders often exit losing positions quickly to preserve capital and avoid further downside.
• Opportunity costs: Even if a cryptocurrency is performing well, investors may evaluate whether their capital could generate better returns elsewhere. Considering recent market trends and macroeconomic data can help determine whether it’s more beneficial to stay in crypto or shift to other assets.

Understanding the tax implications of selling crypto

Since the IRS treats cryptocurrencies as property, investors must account for capital gains or losses when selling their holdings. All capital gains and losses in a tax year must be considered. If the result is a net capital gain, a percentage of the gains must be paid in taxes. Conversely, if the result is a net capital loss, investors can deduct up to $3,000 against ordinary income, with excess losses carrying over into future tax years. Losses carried forward can offset future capital gains.

The tax rate on crypto sales depends on how long the assets were held before being sold. Short-term capital gains (for assets held one year or less) are taxed at the seller’s ordinary income tax rate, while long-term capital gains (for assets held over a year) qualify for lower fixed tax rates. The IRS determines the applicable long-term capital gains rate based on an investor’s annual income and tax bracket.

As of 2025, the IRS recognizes two methods for calculating the cost basis of cryptocurrency sales:

• Specific identification (Spec-ID) allows traders to choose which tax lots are used to calculate gains or losses for each sale.
• First in, first out (FIFO) uses the earliest crypto purchases to determine the cost basis relative to sale prices.

In addition to the methods above, the subset methods of Spec-ID, such as highest in, first out (HIFO) and last in, first out (LIFO), are also available if traders specify to their broker prior to executing any trades. 

CoinTracker: Crypto clarity for more confident trading

Before deciding to sell any cryptocurrency, be sure you know the tax implications. CoinTracker's Portfolio Tracker helps you get an instant read on how a crypto sale will affect your taxable income. Plus, with our tax-loss harvesting tool, you can spot potential opportunities to reduce your tax burden by strategically selling losing positions. 

Get started with a free CoinTracker account today and see how simple it is to monitor your crypto trading activity. 

Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.