Did you buy bitcoin a while back and are sitting on some massive fiat gains? Did you buy a local top and are worried about your bags now that the price dipped 30%? If so, the question has probably creeped into your mind… should I sell my bitcoin?
Although I can’t give you specific trading advice, if you are wondering if you should sell your bitcoin, I have some ideas you should consider before making a decision. Ultimately, whether or not you sell your bitcoin will depend on your current financial situation and your future goals, but I can speak from my own experience and offer the mental framework from which I make these kinds of decisions. Nobody can tell you with a definite answer what will be the “best” decision, but you can certainly learn from others!
Most traditional financial advisors would have told you to never buy bitcoin in the first place, and you shouldn’t trust anonymous bloggers or Twitter accounts, so the decision is yours.
I am a long term holder of bitcoin. I focus on buying as much bitcoin as I can, without ever putting myself in a position that I have to sell it. That’s how I roll. I’ve spent many hours learning about bitcoin, so I’m comfortable with my stack and my plan. If, after reading this, you still aren’t sure whether to sell your bitcoin or not, I think the solution is more education. The more you know about bitcoin, the better you’ll understand how it fits in your life.
4 Reasons To Sell Your Bitcoin
Bitcoin is here, and bitcoin is money for the 21st century. The function of money is to be a medium of exchange, so if you need to sell your bitcoin, then do it. There are lots of memes about never selling, and many strategies on how to “never sell” bitcoin, but I think that’s only seeing part of the larger picture.
Despite what Twitter personalities may tell you, it’s OK to sell bitcoin, and here are some great reasons to sell it.
1. You No Longer Believe In The Bullish Case For Bitcoin
One phrase I like to tell nocoiner friends, referring to the bullish case for bitcoin, is, “Once you see it, you cannot unsee it.” I mean that once you get what bitcoin is and how it’s going to eat the entire world of financialized assets, it’s impossible to not see the world through that lens. It’s why sometimes you’ll hear bitcoiners claim that bitcoin is inevitable.
Most people start out neutrally ambivalent to bitcoin, or even anti-bitcoin, and become a bitcoiner somewhere along the way. If someone sells bitcoin, it’s due to some kind of flawed logic technical logic like they recognize a “head and shoulders” pattern, or they’ll “buy back during quad 4”
We all know how that turns out. Selling based on short term technicals just doesn’t make sense.
Other times, there are people who get out and – stay out. In my experience, this is usually because they think they found the next bitcoin.
It’s a truly rare event for someone to permanently sell their bitcoin and ignore the space moving forward. It’s possible though, so, if for some reason you buy bitcoin, then change your mind and stop believing that bitcoin is the future of money, then there’s no reason to hold it. If you don’t believe in bitcoin fundamentals, then you shouldn’t own it. Simple as that. No pressure. By Felicia!
If you really are that bearish on bitcoin, then my advice would be to just sell it invest in something you care about. There are many other markets and companies where you can make money. Just look at Tesla buyers for the past decade! Try not to become a bitcoin hater though, because you can scream the bearish case for bitcoin until you’re blue in the face, but it’s not going to be a convincing argument for bitcoiners. You may end up with BDS (Bitcoin Derangement Syndrome).
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2. Your Allocation Is Keeping You Up At Night
It’s easy to get caught up in FOMO, and you may have bitten off more than you can chew. If you are lying awake at night, hoping the bitcoin price hits a certain target so you can pay off your credit card, or so that you can afford your house payment next month, then you may have too much bitcoin for your risk appetite.
Some people pull risky moves with their bitcoin allocation and survive to brag about it. Others get spooked, or worse, liquidated, and exit the market permanently (not by choice!).
Selling bitcoin doesn’t have to be an all-or-nothing decision. Maybe peeling off a bit off the top and putting it into a different asset or paying off some bills will make you sleep better.
Before you sell your bitcoin, I would write down a road map of what would make you comfortable. How much cash currency savings do you need for emergencies? How much do you need for food, electricity, family, and other life necessities? How much bitcoin could you own and not worry about losing it all?
These are personal questions you need to answer before deciding on an appropriate allocation that won’t cause you distress
3. You Need To Live Your Life
Maybe you made a plan and executed it exactly as intended, but life comes up and you need some extra money. THAT’S THE POINT OF SAVING MONEY, and luckily, you have a bitcoin savings account in place. Don’t feel guilty about selling bitcoin to pay for necessary life expenses, because the point of bitcoin is not to own bitcoin.
If you own a house, you know how things can pop up unexpectedly. A new roof will cost $15,000+. A new water heater will cost you $1,800. If the air conditioner goes out in June, you really don’t have any choice other than to replace it.
One option is to put those expenses on a credit card, but with 24% APR on some cards, you may be eating into future bitcoin by paying those high interest rates. It may be better just to bite the bullet, sell some sats, pay cash, and start stacking again. In fact, you can see if the person or company will accept bitcoin as payment!
Sure, plenty of people on social media joke about selling their chairs to buy more bitcoin, but nobody is going to give you a high five on your deathbed because you stacked sats consistently for 50 years. As always, do what’s comfortable for you, and what fits your lifestyle.
If you’ve been stacking for a while, you’ll probably have to pay capital gains tax on your earnings. Taxes suck, but just bite the bullet and pay them.
Don’t Overcomplicate It
Sure, there are ways to borrow against your bitcoin and delay selling it until a later date, but if you truly are all in on bitcoin, then you eventually have to sell some and live your life. Remember, most of these “buy, borrow, die” schemes require that you take out fiat loans, then pay back those loans at a later date. Paying back those loans means you need a job or cash flowing business, or the price of bitcoin to rise at the right time. Plus, it’s possible to get liquidated in those positions if you borrow too much.
I’m not saying that borrowing against your bitcoin for fiat loans is bad, I’m just saying that everything has a tradeoff, and in some cases, selling bitcoin may be the best option for you.
4. You Want To Live Your Life
Saving bitcoin is a part of your life, but you should still be living your life how you want to live it. By saving in bitcoin, you can live a great life because you can finally own good money. Nobody is going to celebrate how much bitcoin you have except yourself, so if you want to spend your bitcoin on some kind of luxury, you have the freedom to do so. As long as you understand the tradeoffs and accept them, then there’s nobody that can tell you what to do with your sats.
I mention tradeoffs here specifically because, for many bitcoiners, it’s important to operate their lives with a low time preference in mind. A vacation to Hawaii right now may sound like fun, but if you save those 5 million sats and wait 10 years, they could be worth tens of millions of dollars. Then, instead of a week vacation in Hawaii, you can buy a vacation home there.
Sounds like a pretty good tradeoff to me!
So, when you trade your sats for luxury items, you always have to keep that opportunity cost calculation in the back of your mind.
That being said, it’s still good to have a healthy mind and body. Enjoy your life and do what makes you happy. You can still stack to save while fitting luxury items and experiences into your budget.
5 Reasons To NOT Sell Your Bitcoin
Despite how smart you think you are for buying bitcoin, nobody can time the market. Anyone who timed the market one time successfully, probably can’t do it consistently. That means, if you sell your bitcoin, it’s possible that you’ll never be able to get back into the same position.
For example, let’s say you dollar cost averaged and bought 1 bitcoin over the course of two years, for an average price of $10,000 USD. It took you two years to buy one bitcoin. If bitcoin 10x’s and shoots up to $100,000 in value, then you sell, how long will it take you to purchase another bitcoin? If you keep the same pace as before, the answer is 10 times as long as before, which would be 20 years.
So, if your unit of account is bitcoin, for many people, it will be impossible to reestablish their previous position.
The question you need to ask yourself is, “What is the opportunity cost here?”. If your goal is just to be “fiat rich”, you may want to reconsider selling. If you sell your bitcoin, what would you buy with it?
1. Following Traditional Investment Advice
Standard investing rules say that you should have a target portfolio allocation and rebalance your portfolio after a period of time. However, because bitcoin tends to have periods of parabolic growth, you may find that a 10% allocation to bitcoin suddenly becomes more than 50% of your portfolio in a short period of time.
For example, let’s assume you bought $10k of bitcoin at a strike price of $3,000 USD, as a 10% portfolio allocation (total $100k assets). Now that bitcoin is priced at $60k per bitcoin, the $10k you invested would now be worth $200,000 (20x). Assuming your other assets also slightly grew over the year, your portfolio would now be $200k bitcoin + $100k other assets. A 10% allocation would have grown to 66%!
Using standard portfolio management practices, this means you should sell about 80% of your bitcoin, to remain within your targets.
In my experience, it’s best to double down on your winners and cut your losers. Why would you sell your best performing asset, just so you can invest the profits into underperforming assets? That’s kneecapping your returns!
Diversification may preserve wealth, but concentration builds wealth.
Warren Buffet
If you understand the risk tradeoffs of bitcoin and have a long term time horizon, then, in my opinion, there’s nothing wrong with ignoring traditional financial advice about portfolio allocations. From my perspective, that would be shooting yourself in the foot and getting lower returns based on advice from people who probably don’t want you investing in bitcoin anyway.
2. You Read A Rumor About X, Y, or Z
People make shit up online all the time. I don’t even mean fake-news-style, bending of the facts to fit a narrative. I’m mean straight up lies. A great example is when a fake press release announced that Litecoin had partnered with Walmart. Totally fake. While this was a very high profile event, there are thousands of other small lies on social media that go unnoticed.
A popular meme you’ll see around is people predicting that you’ll never see bitcoin under a certain price again. Some folks may have a chart to justify their prediction, while others may just be stirring the pot. Sometimes, it’s a joke making fun of predictions. It’s hard to say. Either way, you shouldn’t take these price predictions seriously.
Sometimes, it’s not price predictions. Sometimes it’s rumors about future events or hints at private conversations behind closed doors. This is often done for “engagement farming”, since both bullish or bearish predictions can get likes, follows, and shares. A great example is this fellow below, who from time-to-time posts unverifiable claims. This recent tweet got 5,000 likes!
Did it really happen? Who knows? You shouldn’t base your buys or sell around information like this. Stay humble, stack sats, and don’t trade bitcoin based on rumors.
3. You’re Reading Charts & Timing The Market
Chartbois are wrong as often they are right, and there are so many of them, it’s hard to pin down exactly who is wrong or right how many times. Reading cryptocurrency charts is like astrology for men. What I think a lot of n00bs don’t really get is that the people making these charts get more pleasure out of producing a readable prediction chart than actually making money from their predictions.
You never really know what’s going on behind the scenes. A chartboi could post a super bearish chart, predicting a huge dump in the next couple weeks, but that doesn’t mean the person who made the chart actually took action on it. Maybe they just posted the chart as a “what if” style attempt at engagement farming. They may be trolling, or they may be seeding false information and taking the opposite side of the trade.
Selling your bitcoin to time the market based on anon Twitter advice is a good way to end up with less bitcoin at the end of the year. Leverage trading based on Bollinger bands or Fibonacci ratios is a great way to end up getting liquidated down to zero bitcoin.
There is no market timing strategy that works all the time. Even if you made a good prediction a couple of times, it’s extremely difficult to trade yourself into more bitcoin consistently. Every time you sell, you run the risk of missing out on the next parabolic move up. The only guaranteed way to get more bitcoin every month is to stay humble and stack.
4. You’re Worried About The Government “Banning It”
Speaking of rumors, you may hear from time to time that the government is going to ban bitcoin. In my experience, one of the most popular reasons to not invest in bitcoin is that the government might ban it. Why would I buy something if the government is going to ban it in a few years?!
This first thing to consider is that the government can’t stop bitcoin. Bitcoin was banned many times in authoritarian and 3rd world nations like Nigeria, China, Venezuela, Iran, and India. Despite those bans, bitcoin still enjoyed a healthy p2p economy. In fact, in many cases, banning bitcoin seemed to have the opposite of the desired effect, like when bitcoin use surged 15% in Nigeria after it was banned.
If your response to that is something related to their dysfunctional government being unable to enforce the ban, consider that marijuana has been illegal in the USA for many decades now, but that doesn’t seem to have stopped its use, proliferation, and eventual legality (in many states).
Bitcoin Is An Industry With Many Benefits
Secondly, understand that there is more to bitcoin than just the digital asset. There are many companies employing real people and providing IRL services to the bitcoin network and bitcoiners. Already, we see states like Wyoming and Texas moving to integrate bitcoin into their economy, and banning bitcoin would mean stripping assets from those companies and destroying those jobs. For example, there’s a huge bitcoin mining movement in Texas, and Wyoming is working on bitcoin banking.
These examples are US-centric for the time being, but bitcoin is a global effort, so there are very likely similar dynamics in other jurisdictions.
Third, look at where the trend is going. A bitcoin futures ETF was just approved in the USA. The OCC says that banks can custody bitcoin. Public pension funds are investing in bitcoin and bitcoin miners. Senators are holding bitcoin. Athletes are getting paid in bitcoin. Directionally, things are moving in bitcoin’s favor. I wouldn’t worry about bitcoin being banned in Western nations.
That doesn’t mean there aren’t things to be concerned about, but they are more nuanced, like government requiring knowledge of all your bitcoin holdings, or making self-custody difficult, or having special taxes just for bitcoin. That’s where the fight has moved for now.
5. You Wake Up In An Extreme Mood
There will be bull and bear markets in bitcoin, and there will be bull and bear markets with your mood. Bitcoin could drop 20% in a single day and you could start feeling some buyer’s remorse. It may surge 20% and you may get nervous about locking in those gains. Even for experienced bitcoiners, your mood following the market is not uncommon.
This is why it’s important to have clear short term and long term goals. Never invest funds that you’ll need in the next few months, don’t invest with the intention of making a big trade to get rich quick, and look at bitcoin as a long-term savings vehicle. When you aim for 10 years of saving bitcoin, then it doesn’t matter if the price of bitcoin is up or down 20% in a day.
Long term bear markets can be a real mood killer too. After 2017, my net worth was down about 90%, and I really felt like I missed the boat to sell the top. 3 years later, that tune has obviously changed, now that we are at 3x the 2017 top as I write this article today.
Nobody Can Make The Perfect Trade Every Time
Of course, it would have been sweet to sell the 2017 top, buy the 2019 bottom, and make the perfect trade, but can anyone really do that? In 2017 people were calling for million dollar bitcoin by 2020. By 2019 people were predicting deeper dips down to $1,000. Neither event happened. These types of predictions are just wrong more than they are right.
Can you imagine how much more regret I would have if I woke up one day in 2019 and said to myself, “OK, enough is enough. I’m getting out of bitcoin and buying a safe mutual fund!” That example is obvious, but look at the opposite side of the trade as well. What if I did call the 2017 top and sold all my bitcoin. I’d have to pay capital gains on everything, and then where would I re-enter the market?
As always, the only guaranteed way to end up with more bitcoin at the end of the month is to stay humble and stack.
The Worst Reason To Sell Your Bitcoin
The worst reason to sell your bitcoin is to lock in your “fiat gains”. You may not have heard this phrase before, but fiat gains refers to a dollar denominated profit. You may have stacked some bitcoin for a while and are currently shocked and the US dollar denominated value. You may start to think, “Wow, I should sell this before bitcoin goes down!”
Think through to the next step though. What are you going to do with those dollars?
If they are just going to sit in a bank account, you are right back where you started. You are the proud owner of a depreciating asset, losing 2-5% per year according to CPI. You are getting 10-20% further away from buying a home as house prices inflate, and dollar purchasing power tanks. You need to put that money into some kind of price-appreciating asset ASAP!
….and now you’re thinking about buying bitcoin again.
I mentioned 4 great reasons to sell your bitcoin at the beginning of the article, which included asset allocation and life events. That includes the possibility that you have a great investment that will put those dollars to work. That includes life necessities like a home, school, pleasure, or whatever. Bitcoin is money, and money is for saving AND spending. Selling bitcoin just to have a large USD bank account to admire doesn’t make much sense though.
Sell Bitcoin For Something You Want More Than Bitcoin
I don’t have some magic price where I plan to sell all my bitcoin, so then what’s the point of having it? Exactly as I described above. At some point, there may be something that I value more than a portion of my savings. Maybe a vacation home. Maybe a great investment. Maybe my kids going into higher education. Maybe early retirement. Who knows? That’s what the saving money is for – OPTIONALITY.
I picture bitcoin as a train, moving up and to the right, increasing purchasing power over time. You can get on and get off the train at any point, and you can always get back on later. You are not too late to buy bitcoin! If I sell a few hundred thousand, or a million sats, I can always get back on the train and earn those sats back.
Everyone, at all times, is faced with the choice of tradeoffs. Is this “thing” worth more than bitcoin, or should I save some bitcoin and forego the thing?
Right now, my goal is to save as much as possible. I still run my fiat business and don’t have any needs that cannot be satisfied by the money earned from that, so my bitcoin stays in cold storage savings. Plus, I think we are still in the early days of bitcoin, and there’s a decent chance of some parabolic moves to the upside in the next couple years. The tradeoff of foregoing some current luxuries to stack extra sats is worth it.
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Frequently Asked Questions
Should You Ever Sell Bitcoin?
Bitcoin is a globally liquid, permissionless digital asset, so you can sell your bitcoin whenever you want. Some bitcoiners recommend “never selling”, and simply waiting until the bitcoin circular economy develops further, or getting bitcoin backed loans to get fiat cash liquidity with your bitcoin as collateral, but those options come with their own downsides.
Still others advocate for “spend and replace”, where you spend bitcoin for goods and services then purchase more to make sure the size of your stack never goes down. Ultimately, it’s a personal decision of how to manage your bitcoin wealth.
How Long Should You Hold Bitcoin?
Each individual has their own time horizon in mind when buying bitcoin, but a rule of thumb is to hold for one or more halving cycles, or 4-5 years. Personally, I always imagine a 10-year timeline, to mimic the hodlers from 2009 to 2019. Imagine what it was like holding from $1 to $20,000 per bitcoin, and you can imagine the crazy journey it will be from $20,000 to $100,000 and beyond.
Who Pays When You Sell Bitcoin?
When you sell bitcoin, the bitcoin exchange you use will pay you fiat cash in for your bitcoin. An exchange is where buyers and sellers meet, so ultimately, there will be some person, somewhere, who is then willing to buy the bitcoin you just sold. You will need to pay some fees to the exchange to facilitate the transaction.
Should I Sell My Bitcoin When It Goes Down?
If you bought your bitcoin with a long enough time horizon, were aware of the risks, and were prepared for volatility, then you should not have to sell your bitcoin when the price goes down. If you bought with the idea it would go “up only”, but it went down and you have bills to pay, then you may become a forced seller.
When Should You Sell Bitcoin?
You should sell your bitcoin if you no longer believe in the investment thesis of why bitcoin has value and will gain value in the future, or if you need immediate liquidity for some other important purchase or investment.
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