Take Profits, But Sell For What?
DISCLAIMER: Nothing I write or say in this article, social media, and my website(s) is to be considered financial advice!
One of the most common pitfalls after having bought a moonshot or even just DCAing into a strong asset is to never sell and end up round-tripping it.
Even worse. Sometimes people roundtrip it several times across many years.
But remember, anon:
Nobody ever went bankrupt by taking profits.
It’s good to learn to never be too greedy. Take profits along the way. Take back initials. Take some money off your stack to pay some of your debt or to have some liquidity.
Peace of mind is priceless. Nobody is going to help you when you’ll need to sell your Bitcoin at the bottom of the range because you went all in and didn’t have enough spare to pay your bills.
That being said, if you’re an investor, there is not much point in actualizing a huge chunk of your profits and stack to fiat.
Sure, you can take profits and sell everything at the top of the cycle.
But do you sell for what?
Are you selling your assets for the dollar? The “best currency” out there thanks to its status as the “world reserve currency”, and yet it’s down 99% against Bitcoin.
Even gold, despite keeping up with inflation, pales against what Bitcoin has achieved.
So, anon, my question is very simple: what do you sell your Bitcoin (or any other volatile therefore profitable asset) for when your portfolio is up like crazy?
Here I am talking about preserving your wealth across decades, and it’s not a trivial answer or task at all.
Surely we can’t count on fiat, real estate is more of another side hustle rather than passive investment, and precious metals are just facing a slower death compared to the aforementioned options.
Not to talk about taxes! If you invest $100k in an asset that goes up by 20% in a few years, and then in the same timeframe the money supply went up by 20%, you will sell the asset for $120k, but taxes will eat you alive.
Let me explain. Let’s say you pay 20% taxes on capital gains in your country, thus you’ll pay $4k on your $20k profit and net a $14k profit (on paper).
However, because of currency debasement and inflation, the $120k now have the same purchasing power of the $100k back then when you bought!
Can you see the issue? You didn’t gain anything. In fact, you lost “money” in terms of absolute purchasing power.
This is how governments forcibly but silently take wealth away from the masses.
The only way to escape this faith (legally, and without moving abroad lol) is to invest your savings into an asset that can outpace—and will keep on doing so for years on end—the rate at which currency debasement happens.
In other words, if your assets are barely surviving the inflation rate, you’re cooked.
You want something that’s actually going up over time in terms of purchasing power.
That’s why they say “HODL forever“ and “you don’t sell your Bitcoin“.
It’s not that simple, though, because most people are not Bitcoin maxis. Not all people are youngsters that can afford to wait 10 years if we suddenly face a major winter and downtrend.
There is no such a thing as a risk-free investment. But Bitcoin is probably the best long-term risk-adjusted asset to invest in.
As much as I hate to admit it, as much as I hate the term “diversification”, as much as I hate “to hedge”… I have a part of my portfolio in other hard assets (though not as hard as BTC), just so that if an emergency happens I won’t have to liquidate my Bitcoin.
For me, this strategy works the best, and ultimately it lets me put away more money from my cash flow into growing the size of my stack.
Now, throughout the years, if we keep stacking sats, we will be reaching a point after which we have enough money to sustain our lifestyle for a couple of decades.
That’s when I’ll take bigger profits off the table. Put some of it away to be able to live off of it. It’s ok if this part is in way less volatile assets that just “barely survive“ inflation. Its purpose is not to make us rich nor more money.
Just remember, never go all in, but neither all out!