I’ve always struggled with finding the best strategy for taking profits on Bitcoin and Crypto investments. With an asset that you believe in for the long-term (5-50 years+) and something that is extremely volatile, it can be a source of massive stress to watch the prices rise and fall and wonder what you should do about it.
When BTC goes from 5,000 to 10,000 in a matter of weeks, what do you do?
I think we all wrestle with the decision of when to sell. Let’s use the example of someone who bought in mid-march around $6k and is now looking at BTC at $10k.
While many investors would say take your profits, seasoned people in the crypto space know that BTC going from 6k - 10k could be a signal of the beginning of a massive run-up to $20k and maybe even beyond that point. Especially with the converging effects of the halving, the brrrrr activities and economic unrest.
What I’ve Done in the Past and How It Affects What I Do In the Present:
Our past is often the core indicator of our present and future. We use our prior experiences to try and better inform our present and future decision making.
For investments, it’s no different. When you’ve made mistakes or had successes in the past, they’ll often seep into your present day decision making and inform your strategy.
One of the greatest mistakes I made in investing was back in 2017-2018 when I had accumulated quite a sizable amount of crypto and then experienced the incredible bull run that brought BTC up to $20k and many of the alts along for the ride to the moon.
I saw my portfolio 10x and even 20x in some cases. It was a crazy time for me, as that was the first time I (and probably many others) experienced such a drastic rise in portfolio value in such a short period of time.
I started to take profits out of crypto as the prices rose to those amazing heights. What I consider to be a mistake is how I chose to handle the programmatic selling and subsequent programmatic rebuying of my crypto positions.
In hindsight, the smart investor in me should have known to set sell levels as limit orders on the way up and just sit tight on the way to the moon. Allowing my sells to fill slowly as the prices continued to rise higher and higher.
Then, I should’ve done the exact same thing on the way down. Set buy orders that accumulate the positions back slowly and methodically. Then sit tight.
Instead, I did what many investors do — I saw the price go up a lot one day, and I sold a big chunk of what I had. The next day, I did the same.
So on and so forth. I made a killer profit — as I said, 10x and even 20x on some of those positions — but I could have made a lot more had I been more patient and methodical.
The real mistake was on the flip side — when I started buying back in. I saw BTC and other alts drop 20-30% in price on a day and decided to take a huge chunk of my cash position and go back into crypto with it.
The next time it happened, I did the same thing. Buying back in with large chunks in the midst of a major correction.
The problem with that strategy is that a 2 year long bear market was just in its infant stage. I would enter those positions about 1+ year ahead of the lows and looking back on that time is painful. Of course, I was playing with house money as I had sold plenty of profits at the top and hedged into traditional assets and equities.
If I could get a magic do-over button, I would go back and set methodical buy orders and allow my cash position to slowly re-enter the market over the period of several months rather than FOMO back into crypto as the prices corrected rapidly.
How I’m Approaching The Crypto Market This Time Around:
I feel that I’m a bit more seasoned now in terms of approaching this “bull market" - I have a lot to learn and will surely kick myself 2 years from now over some decision that I made. Regardless, I am taking the lessons of the past and trying to follow a better strategy in the present. As we see BTC reach $10k today and (hopefully) $20k+ in the next 1-2 years post-halving, I am already setting my methodical sell levels after the last 2 years of accumulating BTC in a bear market.
All of these sells are massively in the money. The question that I’m attempting to answer — which is the age-old question for investors — is how much profit will I make? Will I cash out too soon? Will I leave enough of a bag to be meaningful in the long-run?
I am fortunate enough to have the ability to hold a long-term bag of cryptocurrencies and not have to worry about paying my living expenses with them in the short-term. It allows me to have a mindset of waiting several years for my eventual payoff, which is how I look at most of my investing practices — focused on the long-term and not on short-term gains.
Taking profits at methodical levels and then patiently buying back in at methodical levels is now the name of my game. I’ve already had a few sells hit on the way to $10k/BTC and now I have a few more orders up to $14,000 and will likely set some more on the way to $20k+
Obviously, these sells represent a tiny amount of the overall BTC that I own. The point of these sells is not to cash out but rather to take profits off the table. To alleviate some risk and open up the window of opportunity to potentially buy back in at a cheaper price should BTC fall back down to 8k, 7k, 6k, etc.
As this all cools down and we see BTC correct to the downside, I’m going to be methodical in my re-entry and follow a similar protocol — setting future buy orders at pre-determined price levels to accumulate more BTC.
I’ve accumulated much of the BTC that I want to have for the long-term. That's what truly matters. This practice is simply about staying active in the markets while implementing some risk-management habits. The vast majority of my crypto will sit and look pretty, untouched for the years to come.
How do you approach a bear/bull market? Do you buy/sell methodically, sporadically or ____?