When is the time to change your cryptocurrency for fiat money?
How to know when to sell your cryptocurrencies?
Every day there are more people who keep in their possession some cryptocurrencies, especially after the episode they had last year with the incredible increase in prices in the market. Likewise, its adoption has been motivated by the faculties that have become known about the blockchain technology, used to support the operation of each of them.
Although this technological and financial innovation is close to reaching a decade, it has been in recent years in which a greater number of projects have been developed in the ecosystem. Each new technology or service based on cryptocurrencies has caused an increase in the intentions of use and acceptance by the communities, expanding its scope and improving its future forecast.
Between the expansion of capacities for its use, its decentralized status, the security and transparency provided by the blockchain technology and the value that they can generate, there have been many users who chose to migrate in a large part of the traditional financial system. frequent handling of cryptocurrencies, even in spite of certain disadvantages that also characterize them as volatility.
However, the investment and frequent use of these digital assets may be interrupted by other events that, being unrelated or related to the market, imply discarding them temporarily in a certain space to make use of the fiduciary money again.
Reasons why it would be a good time to make the change
Occasionally, there may be situations in which fiduciary money will be more useful to a cryptoactive, since the domain and the greatest acceptance belong to this type of currency. Similarly, within the ecosystem, there will be times when it will be necessary to make this exchange for eventualities that put our reserves at risk and because of others that may serve us strategically.
Above all, these types of considerations, some of the most frequent reasons for making the change are usually:
Specify or Require Fiduciary Money
Obviously the world is still managed under a traditional financial system where the fiduciary currency is one of greatest use and acceptance among people and traders. That is why, even with the benefits provided by cryptocurrencies and blockchain technology it is essential to keep reserves of the currency in progress at the place of residence.
Despite this, it is possible that at some point the assets in cryptocurrencies may exceed the reserves available in fiat currency, which would lead to make the change to meet the demand and cover certain expenses or pending payments originated regularly.
These imbalances tend to occur mostly when, in the presence of an optimistic market, an investor uses all his resources to get the most out of it, thus remaining without the necessary funds in his usual currency.
Solve extraordinary expenses
As in the previous case, there may be situations in which reserve funds in fiduciary currency are not sufficient if an extraordinary extraordinary expense is to be handled, which would inevitably lead to a change of currency for the indispensable amount if This is available.
For this situation, it is not necessary that these expenses represent an emergency in the end. Business opportunities in the same way can arise as an extraordinary expense. So if you can get a significant return in the short term you can invest again in the amounts that were used.
It is important to bear in mind that not all emergencies, nor good investments, are within the reach of cryptocurrencies or their own means, so that due to possible circumstances, it will be worthwhile to get rid of some of them, either for an issue of gravity or not.
Back up funds for security failures
Security is one of the aspects most considered by cryptocurrency projects and, at the same time, it has the characteristic immutability of blockchain technology that relies on its decentralized operation through all the nodes in the network. However, there may be vulnerabilities in any cryptocurrency platform and even more in the exchanges referred to by users in the community.
There have been many cases of theft of these exchanges and platforms due to security failures, which even after being executed and made public the error, this is not solved immediately as it is usually announced, becoming a latent risk that could endanger the funds stored.
In the face of these situations, a plan that evades that risk is vital, either moving the cryptoactives to off-line storage or, in the other case, converting the funds to a fiduciary currency until the vulnerability is actually solved.
Avoid losses in the face of the imminent failure of a cryptoactive
Not all the cryptoactives released to the market have a resounding success, as has been the case of Bitcoin, Ethereum and other platforms. There are projects that can be affected by multiple factors that prevent their takeoff and development, to end up collapsing completely.
Generally these factors are associated with poor technology, poor performance of the team that supports it or simply by the poor adoption they have on the part of the community. Mainly start being projects with a lot of attention but with a lack of strategy for their development.
On the other hand more serious, there may also be cases of mismanagement that end up becoming a scam for users of the ecosystem, causing significant losses in any investment made.
In circumstances of this magnitude, it is preferable to immediately withdraw our funds to a fiduciary currency, in order to maintain a percentage of value that can reduce the level of losses due to the imminent failure of the project.
Take advantage of a fall in prices in the market
No one is a secret levels of volatility that characterize the cryptocurrencies in the market, developing bullish or bearish trends as events that affect the ecosystem are taking place. However, these trends can be exploited in both directions if a good strategy is established.
Many of the enthusiastic investors take advantage of the fall in prices to sell their assets and acquire them again at a lower value, seeking profits once the trend reverses. A very frequent movement used by day traders in the market.
Although this action can be carried out by hiding in another cryptoactive, it would not be very far from the situation of volatility that led to lower prices, so a change to a fiduciary currency would provide the temporary stability that would be necessary until the time to make the repurchase.
As always, all these actions are linked to a risk. It may turn out that for some cases the trend is definitive and the absolute value is not recovered. In such a way that it is necessary to carry out a study of the circumstances, covering the aspects that may have affected the market and what the future projections may be.
Final words
Discarding cryptocurrencies does not necessarily have to be a traumatic or definitive process, it simply takes into consideration situations that require a specific use in fiduciary currency and are backed up with the digital assets that are possessed.
This could be taken as another advantage of the cryptoactives, which at any time of need, we can also use it either in its own form or leading to the exchange of another fiduciary currency through the services of exchange.
Finally, it is essential to maintain good management of both funds, both in cryptocurrencies and in fiduciary currency, to respond more easily to eventualities and counteract the negative effects that may arise in the ecosystem.