It’s been a beautiful year for crypto. We had a nice dip in March 2020 which turned out to be an amazing buying opportunity. Now we’re seeing unprecedented growth and adoption.
Here are just a few of the major companies to jump on the bitcoin bandwagon so far: Visa, Mastercard, Tesla, Square, Fidelity, Bill Miller’s billion dollar hedge fund, Microstrategy and Guggenheim Investments.
I think we’re going to see a major breakthrough soon. Crypto seems to truly be on the edge of going mainstream.
However, it is still early, and risks remain for crypto prices (the one I think about most is what happens if the stock market tanks). I think this bull run still has years to go. But it’s best to think through risks early and have a plan in place to take profits strategically. Taking profits can be surprisingly hard once you’ve become a hodler.
Deciding when to take profits is a highly personal issue. Everyone’s situation is different, so we can’t use a broad rules-based approach.
For example, if you could take some profits and use the proceeds to pay off credit card debt, go for it! If you need cash and you’re up big, it probably also makes sense to start taking some profits. You can do it slowly, in 5% or 10% chunks. Spread your selling out over time.
It’s also a good idea to start thinking about profit taking if crypto has grown to a large percentage of your overall portfolio. Consider taking some profits and putting the proceeds to good use in areas like gold, silver or emerging markets. It’s important to have diversified hedges.
If you bought back when we first recommended bitcoin to First Stage Investor members at around $2,700, you’re up pretty significantly at this point. It wouldn’t be a horrible thing to take some long-term gains.
But if bitcoin is still a reasonably small part of your portfolio, you have plenty of liquidity and you want to keep riding crypto for years to come, there’s nothing wrong with that either. Like I said, it’s a personal decision. When I do decide to start selling, I plan to do it slowly — over the course of multiple years. This way I won’t kick myself quite as hard if bitcoin soars to $300,000 or beyond.
I plan to start recommending some profit taking in the near future. But if you bought at $20k or $40k, it may not be time yet. Most people don’t buy bitcoin for a 2x gain. I think there’s a good chance that crypto keeps rising. Bitcoin could hit $300k or more in the next few years. But of course, there’s always a risk that it goes the other direction. My approach will be to take partial profits over a longer time span.
But don’t feel like you have to do exactly as I recommend. Everyone’s situation is unique. My general advice is: if you need the money, take some profits. Hopefully you’ve held for more than a year and will benefit from long-term capital gains tax rates.
Just be sure to hold onto a nice chunk of your crypto portfolio, because it’s possible this bull market is just getting started.