Coinmotion Releases “Investor’s Guide to Bitcoin 2021”

The startup Coinmotion has launched a few days ago the Investor’s Guide to Bitcoin, from the ‘Observatorio Coinmotion de Criptoactivos’. In it, the cryptocurrency broker gives us some interesting guidelines on how to proceed when investing in cryptocurrencies and, specifically, in bitcoins.

Through a series of questions and answers, the guide tells us about the strategies of large investors, when it is better to invest and when not, why it would be necessary to maintain portfolio investments, etc.

When to sell and when not to?

Long-term investors do not necessarily have to think about selling the investment for a shorter period. For example, many bitcoin investors are long-term investors, that is, holders or hodlers, as they are also called, which means that they have no need to sell their bitcoins. The hodlers they are characterized by buying and maintaining their previous investments.

They also buy more bitcoins but don’t sell them. However, sometimes a moment may arise when it is time to sell. This article will address Warren Buffett’s investment philosophy by applying when to sell and when not to.

Warning, scroll to continue reading

When does Warren Buffett sell?

Warren Buffett is one of the richest men in the world and perhaps one of the most named investors, he is known
for your buy-hold style when investing in the stock market. This means that when Buffett buys an investment, the
you keep it in your portfolio until, at some point, it’s time to sell it.

Buffett has said that There are two reasons why it sells, and these are:

  • If you discover an even more promising investment to buy.
  • There is a change in fundamentals, that is, reasons for holding an investment in the portfolio.

Under the first reason, Buffett doesn’t sell an asset until he finds an investment with more potential to replace it. The new investment can be an exceptionally cheap lens, which was previously unavailable. In this case, an investor can liquidate profitable assets, since the expected return on the new investment can be
more promising than the current one.

However, it can be difficult to exactly compare these objectives to ensure that the acquisition of the new investment is certainly more profitable than another.

According to the other reason, Buffett sells an already acquired asset when its fundamentals change. This means that if, for example, an asset’s competitive advantage relative to its competitors weakens considerably, then it may be time to sell the asset. However, each investor must do a thorough analysis of competitive advantage.
weakened and their reasons before making a decision to sell. This is to ensure that the lead has indeed weakened and is not just fear based on a market rumor.

Can these teachings be applied to the cryptocurrency markets?

Although Buffett is an investor who is dedicated solely to the stock market, this does not mean that his teachings could not apply to the cryptocurrency markets as well.

1. The potential of an investment, what your strengths and weaknesses mean, should be analyzed at regular intervals and
compare yourself with your competitors. Therefore, Buffett’s first teaching dictates that one must sell every time
find an investment with greater potential to replace the current one.

However, the special features of the cryptocurrency markets must be taken into account. For example, Bitcoin does not
seems at the moment to have a strong competitor in its own segment, which means that nothing threatens the advantage
or bitcoin’s position as a market leader. Although the second most important cryptocurrency, Ethereum, has
Strengthening its position in the last year, Bitcoin remains a clear market leader. Another topic of debate is whether it is
correct to compare Bitcoin and Ethereum.

2. In the case of cryptocurrencies, Buffett’s second teaching may be more worth following: If the fundamentals
changes significantly, then it is worth considering selling the investment. This change in fundamentals would mean, for example, that the relative competitive advantage of an investment was significantly weakened.

In the case of bitcoin, its competitive advantage can be measured by the built-in characteristics of Bitcoin, including scarcity, third-party independence, and decentralized decision-making. The future of Bitcoin’s technical performance depends more on future development work, but even that can be considered as one of its current competitive advantages.

Therefore, if any of these aforementioned characteristics were seen as significantly weakened, then the same would apply to Bitcoin’s competitive advantage. An example of this would be a surprising change in scarcity
of Bitcoin due to an increase in Bitcoin stocks.

In such a situation, the built-in scarcity feature of Bitcoin would have been put in jeopardy, meaning that its competitive advantage and shield against inflation would have been weakened as well. In such a situation, an investor could
Consider selling the investment. However, this is a highly speculative and unlikely scenario, as
It has never happened in the history of Bitcoin and it probably never can.

Another thing worth remembering is that the news from the media about cryptocurrency markets They have been quite sensational for years. For example, the last few years have seen Bitcoin declared dead hundreds of times, but this has never been the case.

An investor should be very cautious when reading the news in the media, so that a false rumor does not lead to hasty decisions to sell a lucrative investment.

So when should it not be sold?

  • When the investment price drops significantly.
  • When the investment price has increased significantly in a short period.
  • When a billionaire sells.

As can be seen from these guidelines, these may not be the best advice for a short-term investor. However, a long-term investor may still find them useful.

  1. If the value of an investment decreases significantly, an investor may have to analyze the situation based on its basic fundamentals. Have there been any notable changes in the characteristics of the investment that have weakened its value? If not, then an investor has the opportunity to buy low rather than sell.
  2. When the value of an investment has increased significantly in a short period of time, it may not be the best time to sell. This is because the investment valuation may have changed due to some news or technical updates, which may lead to a further vertical rise in prices. This is rarely seen in the stock markets, but the cryptocurrency markets are another world. And when the rise begins, an investor may have to learn patience and re-analyze the situation on the basis of basic fundamentals. If there are no changes in the basic fundamentals, then there is no reason to sell.
  3. If a billionaire sells, then a long-term investor shouldn’t necessarily sell. This is because a billionaire’s decision to sell may have no connection to the investment sold itself. It may be a reorganization of the billionaire’s own business plans, requiring the liquidation of some assets. The billionaire may also sell and buy back the investment through funds or companies at a cheaper price.

Regardless of the reason, it may be prudent for long-term investors not to imitate the decisions of investors.
billionaires. So, it is advisable to do your own analysis of portfolio assets before liquidating them through sales. And if you intend to sell, it is good to make sure that this decision is based on concrete observations, which means the appearance of a better investment or a change in fundamentals relative to competitors.

In other words: The sale must always be based on a specific reason. Hope these tips are helpful and good
luck in the markets. This analysis does not present any investment recommendation, nor should it be construed as such. Profiting from the markets often requires in-depth knowledge and several years of experience.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *