Financial bubbles are nothing new. From the tulpenmanie of 1637 to the dotcom crash at the start of the millennium, the investing masses have repeatedly shown that they can be susceptible to over-enthusiastic speculation despite a distinct and obvious lack of fundamentals in their chosen financial instruments. Today, we’ve gone from buying tulip bulbs that cost ten times a skilled artisan’s annual income to shelling out a year’s salary for a single unit of unbacked, digital currency. While some people have profited from crypto trading, it lacks the foundation of long-term investments, prompting investors to analyze cryptos to sell.
Yes, crypto offers high-yielding investment opportunities — including thousand-percent gains over short periods — for those willing to face proportionately higher risks. However, as market cycles reach their peak and other people pocket their gains, there comes a time when wise investors need to prune their portfolio for cryptos to sell.
Here, then, are three coins to consider selling.
Bitcoin (BTC)
As the granddaddy of all cryptocurrencies and the general barometer for the rest of the market, Bitcoin (BTC-USD) has earned the top spot in many crypto investors’ hearts. Unfortunately, it has also earned the top spot in this “cryptos to sell” list.
Many investors have perhaps heard of the upcoming Bitcoin halving event. This foundational procedure has been touted as a catalyst for further growth, and, indeed, BTC prices have soared to new highs these past few weeks.
However, many investors may have misunderstood the event. I’ve seen questions floating around the internet asking if halving is the same as share consolidation (or reverse splits) in traditional stocks. For clarity, halving only affects the production of new BTC from mining and does not combine existing coins. The next halving will happen in April this year, bringing mining rewards down to 6.25 to 3.125 BTC.
Common sense dictates that reduced BTC production over the next four years could increase demand and prices, which has happened in previous halvings. However, BTC’s price movement suggests that investors have already priced in the event. In fact, we’ve already seen massive profit-taking. On March 5, BTC’s price dropped from $69,000 to $59,000 in a couple of hours. While it climbed back up to its new all-time high above $73,000, it went down to $66,000.
To be fair, BTC’s price has always stayed above the previous years’ after every price correction. It is also doing better than 90% of available coins today. However, the exceedingly high prices put investors at risk of being left holding the bag once the inevitable correction happens — and then they’d have to wait for the next bull run in a couple of years to break even.
Binance Coin (BNB)
Binance Coin (BNB-USD), the native coin of popular exchange Binance, faces headwinds as accusations and lawsuits pile up against its parent company, making it a prime candidate for one of many crypto stocks to sell.
For context, Binance encourages using BNB for transaction fees on its platform, giving investors incentives like reduced charges and expanded trading and conversion options. However, things haven’t been looking too good for the company, which will ultimately decide the fate of BNB. Ex-CEO Changpeng Zhao pled guilty to violating U.S. anti-money laundering laws last year. This led to a U.S. court approving a $1.8 billion fine levied against Binance, plus the forfeiture of $2.5 billion worth of assets.
Even before the sentencing, some analysts have questioned whether Binance can pay off these fines without dipping into client funds. This predicament eerily parallels the fate of FTX. This now-defunct crypto exchange company folded due to liquidity issues and fund mismanagement exacerbated (and caused) by the fraudulent activities of previous CEO Sam Bankman-Fried.
A quick glance at BNB’s chart may indicate a different view, as it briefly exceeded $600 per coin a few weeks ago, mirroring its pandemic-era highs. However, we need to consider that the cryptocurrency market operates heavily based on speculation, and the rising prices of popular coins like BNB are historically positively correlated with the rise of BTC. Furthermore, Binance faces extensive scrutiny, and prices may take a massive hit if U.S. investigators find any new issues with company operations, which could lead to its bankruptcy.
Dogecoin (DOGE)
By their very nature, meme coins are better for short-term speculation than long-term investments. Dogecoin (DOGE-USD), ostensibly the first and arguably the most popular meme coin, has seen its time in the limelight and is now trading at a fraction of its 2021-2022 values.
DOGE, unfortunately, has the same issues that hundreds of other smaller crypto coins suffer from. Unlike BTC, Dogecoin has no hard supply cap or anti-inflation protocols. The final nail in DOGE’s coffin is its overreliance on popularity to increase its price. Unlike stocks or traditional financial instruments, crypto coins like DOGE have no intrinsic value and live at the mercy of internet trends, which can quickly and permanently disappear from public consciousness.
Its massive rise to fame can be attributed to internet memes and indirect promotions from celebrities like Elon Musk. It’s unlikely that Musk can pull off the same stunt, however, since he faced heavy backlash from alleged market manipulation tactics and accusations of insider trading the last time around.
DOGE might’ve launched thousands of “to the moon” memes and made the list of top coins by market cap back then, but, in its current state, it’s a more fitting inclusion to “cryptos to sell” lists.
On the date of publication, Rick Orford did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
