How long should you hold a cryptocurrency investment?

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If you own digital coins like bitcoin or ether, when should you sell? CoinSmart’s Steven Kraft offers strategies for crypto investors.

How long should you hold a cryptocurrency investment?

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I’m new to investing in bitcoin and ether, but a long-time investor. But since cryptocurrencies are relatively new as investments, I was wondering if you could explain what it means to be a long-time crypto investor. How long should I hold on to it?
—Sadie

A long-time investor is someone who, as the name suggests, adopts a buy-and-hold strategy. These investors aren’t looking for short-term profits—they’re in it for the long haul.

The strategy of buying and holding a cryptocurrency is often referred to as “HODL,” short for “hold on for dear life.” This strategy reduces risk for investors because they’re not affected by short-term volatility.

As for how long you should hold on to your crypto, I hesitate to answer this because everyone’s financial situation is different. But often, people treat bitcoin (BTC) like gold and hold on to it for years.

Playing the long game

Long-time crypto investors believe patience and time are their biggest assets. In contrast to stock traders, for whom constant effort, ongoing research and active management are necessary, crypto investors focused on the long term tend to do their research up front, purchase their coins, place them in their wallets and let time increase the value of their cryptocurrencies.

For example, if an investor had purchased a single bitcoin on March 16, 2020, they would have paid US$5,000. That same bitcoin was worth US$40,900 on March 16, 2022. By doing their research up front on the potential value of the coin, purchasing it and leaving it alone, the investor would have enjoyed a return of more than 800% in two years. 

Of course, there are no performance guarantees for bitcoin—or any other cryptocurrency—so it’s important to understand the risks and invest within your risk tolerance. 

Strategies for crypto investors

Now, as I mentioned above, there isn’t just one answer as to how long you should hold on to your cryptocurrency. But there are methods that could give you a potential edge in maximizing your returns. 

First, instead of buying your chosen cryptocurrency in bulk, you could employ a technique called dollar-cost averaging. This involves making small purchases of the cryptocurrency over a period of time, rather than buying a large amount at once. This strategy spreads out risk and helps prevent an investor from mistiming the markets. 

Second, when you do see great profits over a period of time, your options aren’t limited to either selling off your entire investment or continuing to leave it untouched. You could choose to sell off your profits, then re-invest them into the same cryptocurrency when the price eventually drops. 

Remember, when you sell cryptocurrency, your earnings are taxable as either capital gains or business income—which one will depend on the circumstances of your crypto activity. Read guidance from the Canada Revenue Agency, and if you need tax advice, talk to a financial professional.

How long should you hold a cryptocurrency investment?

Steven Kraft is a cryptocurrency and blockchain expert who leads operations at CoinSmart, a Canadian cryptocurrency trading platform. Sign up for an account* with the code money30 and receive C$30 in bitcoin when you deposit a minimum of C$100. 

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