Key Takeaways
- Investors face a tough choice between selling for short-term gains or holding onto their assets to support long-term market growth and adoption.
- Large-scale selling, especially by institutional holders, can drive down prices rapidly, which may discourage new users from entering the crypto market.
- Holding onto crypto assets, or “hodling,” helps to stabilize prices, support market growth, and build confidence in the real-world use of cryptocurrencies.
- Large institutional investors play a crucial role in the crypto market, with their actions either stabilizing or destabilizing the market, impacting adoption and long-term growth.
For anyone who’s invested in Bitcoin (BTC), Ether (ETH) or another cryptocurrency, it’s not simply about buying coins and hoping they’ll make you rich. There’s a real dilemma when it comes to the impact of selling on crypto adoption.
In simple terms, the crypto adoption dilemma boils down to a choice between short-term gains and long-term growth. It’s a tough decision to make between taking profits during the good times and staying strong, holding your assets and stabilizing the market to aid adoption.
The decision to hold or sell your crypto affects more than an individual or institution. It impacts the whole crypto ecosystem — particularly for the larger holders known as “whales.”
If there are large volumes of crypto being sold, prices can drop quickly. This can scare new crypto users away from the market. While holding on and even using crypto in daily life helps to steady prices. Plus, this shows real-world applications for digital currencies. This helps to build confidence in wider society for the technology.
Understanding cryptocurrency adoption
Cryptocurrency adoption refers to how much of the world is accepting and using digital currencies.
Often, this is measured by how many people in the world own cryptocurrency. For example, in 2024, it is estimated that 6.8% of the global population, 560 million people, own cryptocurrency.
Adoption also refers to institutional and even governmental acceptance. These organizations have a huge role to play in integrating crypto into the traditional economy. This includes integrating blockchain technology into business operations, offering accessible investment options and holding cryptocurrencies on their balance sheets.
With new technology, there are typically several steps to mainstream adoption:
While many see cryptocurrencies as a high-risk investment opportunity, blockchain technology is the real key to adoption. It offers a transparent and secure way for the world to transact. The security and efficiency of blockchain provides a step forward in network technology.
Applications built on blockchains generally require cryptocurrency to operate efficiently. This means as the world uses blockchain more and more, we will have to rely on cryptocurrencies to transact on these networks.
Did you know? The Bitcoin blockchain wasn’t launched until 2009, but blockchains were first conceptualized in the 1980s before Stuart Haber and W. Scott Stornetta wrote a white paper in 1991, which is referenced in the original Bitcoin white paper.
Crypto’s appeal of selling for profit
In its short lifespan, crypto has already grown exponentially. Early adopters of Bitcoin have seen their funds grow to be valued in the millions. It’s not just Bitcoin, either; hundreds of coins have become heavy financial hitters. Ether, Solana (SOL) and XRP (XRP), among others, now have multibillion-dollar market capitalizations. Even joke memecoins like Dogecoin (DOGE) and Shiba Inu (SHIB) are millionaire makers — especially during bull runs.
As you can imagine, this makes it incredibly lucrative to sell crypto for traditional fiat currencies during market peaks. Sellers are keen to “lock in” or cash out their profits at the first sign of trouble. This is rather ironic, as it is that decision to sell that causes the prices to spiral downward. In the crypto world, these people are often referred to as “paper hands.”
On the other hand, there are individuals and institutions with a longer-term vision. Their goal is to resist the allure of short-term gains in exchange for the future benefits of holding assets. These people are often referred to as “diamond hands.” Cryptocurrency investor behavior that avoids panic during big price fluctuations. Diamond hands are strong in their conviction that holding and continuing to buy more crypto eventually leads to mainstream adoption.
Major sell-offs damaging crypto adoption
The pull of quick profits is hard to resist. It has become a common phenomenon to see Bitcoin reach impressive new all-time highs followed by a severe drop in price.
For example, in December 2017, it hit a historic landmark of $20,000 for the first time. Traders were astounded; early adopters were rich; and many hastily cashed in their coins, sending the price crashing down to $12,000 just 12 days later. The Bitcoin crash pulled the wider crypto market down, too — all but two of the top 100 coins dropped in value.
Volatility in the crypto market is no joke. Fear spreads quickly through the market, meaning many investors start selling at the first sign of trouble. After weak employment data and fears of a recession in the US in August 2024, $510 billion was shed from the total market capitalization. Bitcoin and Ether both dropped more than 20% in just a few days.
How selling affects crypto market growth
Strong crypto selling trends have a big impact on price and reduce the value. This is because the market becomes flooded with a huge supply, meaning there are more sellers than buyers. High supply leads to lower prices.
Let’s understand how “selling” influences the crypto market:
- Institutional selling and market impact: The problem is particularly acute when institutions sell large holdings quickly. In June 2024, the German government used five different exchanges to simultaneously sell $60 million worth of Bitcoin in multiple batches in one day. This put downward pressure and fear into the markets. The result? Prices fell 7% in the month and only recovered after Germany ran out of Bitcoin to sell.
- Effects of increased buyer demand: Correspondingly, lots of people buying crypto helps to increase the value. When there are more buyers than sellers, the available supply is reduced. Low supply leads to higher prices. These prices going up and down regularly is known as volatility. Wild price swings can scare off new investors. They might think crypto is too risky — especially when prices fall quickly. It creates fear, uncertainty and doubt (FUD). This puts potential new adopters off.
- Selling, volatility and market maturity: Selling and price volatility are normal in any market. However, in crypto, its effects are heightened as the market is still maturing. To overcome this problem, it is practical to think long-term. Encouraging investors not to panic sell and hold on to their crypto helps to reduce the wild volatility. The more stable the market becomes, the more confidence it breeds in crypto. This confidence helps to speed up adoption.
Balancing profit-taking with market growth
For crypto investors, it’s a fine balancing act: when to cash out and when to hold on. It’s a tricky decision that can make or break your investment strategy.
Let’s understand how to balance profit-taking with market growth:
Responsible selling
It is a way to balance profit-taking in cryptocurrency and encourage adoption. Rather than dumping all your coins at one time, you should take a gradual approach. Particularly during periods of growth, many people strategically take profits. For example, you might sell a small amount every month or quarter. This is a calm approach that doesn’t fuel market fears and crashes.
Hodl
Crypto adopters with strong convictions about the future use a strategy known as hodl (“hold on for dear life”). The decision to hold onto your assets long-term helps to stabilize the market. Plus, you might enjoy bigger returns in the future.
Hodling has already made crypto millionaires. Mr Smith, an anonymous software engineer, invested $3,000 to buy 20,000 BTC in 2010 when it was worth $0.15. Three years later, once Bitcoin hit $800, he sold a small portion of his coins for $2.3 million.
Then there’s Rachel Siegel. She’s a crypto millionaire, but in 2017, she was a substitute teacher living paycheck to paycheck. She started putting $25 a week into crypto and hodling. Over the next five years, her coins grew in value to over seven figures.
It just goes to show that buying and holding crypto for years leads to incredible growth, both for individuals and the market as a whole.
Did you know? Hodl is a crypto slang term meaning to “buy and hold indefinitely,” but the term arose from a misspelling in a Bitcointalk form post in 2013.
The role of institutional investors
The challenges in crypto adoption aren’t just down to individuals. Large institutional investors play a mighty role in the market. With their larger capital reserves, they have the ability to either stabilize or destabilize the market. Institutional money can make or break adoption in the long run.
This could be in the form of companies or governments buying and selling Bitcoin or through the integration of cryptocurrency into the traditional financial market. The addition of Bitcoin and Ether exchange-traded funds (ETFs) in 2024 is a colossal step forward in crypto adoption and market stability. This is because it enables large investment funds, such as pensions, to take a stake in crypto.
BlackRock, one of the world’s leading investment fund managers, has grown to become the largest digital asset fund manager. Its funds now hold over $22 billion worth of crypto. Billions of dollars flowing into the institution’s Bitcoin ETF helped drive prices to new all-time highs during 2024.
As discussed earlier, this adds more buyers to the market to reduce volatility. These investors tend to have a longer horizon and don’t react to short-term price movements. They’re around for the long haul and help steady the crypto ship. But if these big fish decide to sell, then watch out: It might not be so smooth sailing.
Did you know? Michael Sailor’s MicroStrategy has gone “all-in” on Bitcoin. As of 2024, the company owns over 200,000 BTC, more than 1% of the total coins in circulation.
Future outlook: Encouraging sustainable growth
There’s no doubt there’s a real crypto adoption challenge. However, there are ways to promote sustainable investor impact on crypto growth. Its decentralization means everyone has a role in shaping a more stable future for digital currencies. The more people and institutions involved create stability by removing issues where single players can shake market confidence.
Educating new investors about the long-term vision and benefits of crypto is key. The first step is understanding blockchain’s impact on finance and technology. Building strong confidence in the underlying technology helps move people away from the effects of profit-taking on crypto and the idea of “getting rich quick.”
Strong communities, open-source projects, media coverage and real-world applications all have their role to play in this education.
Adding to this, many crypto, non-fungible token (NFT) and blockchain projects now design their tokenomics (how the crypto works) to promote long-term growth and stability. This includes offering staking rewards for long-term holders. It’s like paying interest to coin holders — people are incentivized to hodl rather than sell.
The crypto adoption dilemma: Long-term crypto holding vs. selling
The crypto adoption dilemma is tricky. Crypto market growth and selling crypto for profit is a challenge every investor faces. The decentralized design of blockchain means every user’s decisions impact the whole ecosystem.
To encourage adoption, it’s key to think about how selling affects crypto growth. How will your choices help strengthen the crypto market? Don’t be afraid to join discussions and educate new adopters about crypto market fluctuations and adoption.
Written by Marcel Deer