When (and How) to Sell Your Bitcoin
Andrew Packer, Grey Swan Investment Fraternity
Last week, Addison asked me when I’d sell my bitcoin. Given the cryptocurrency’s pop higher to a peak of $93,000 last week, and it closing in on $98,000 today, it’s a good question.
The short answer? I’ll never sell all of it. At this point, it’s likely not even half. As the saying goes, bitcoin has no top price, because fiat currencies can be printed to zero.
The longer answer? I’ll try to take advantage of bitcoin’s market cycles to build a stake at the lowest cost possible.
Remember, bitcoin started in the throes of the 2008 financial crisis. At its core, bitcoin is a piece of code. You either run it on a node of your own and accept it, or you don’t.
It’s not shoved down your throat like your country’s monopoly paper currency. The rules don’t change arbitrarily. And it’s now too powerful for someone to control 51% of the network and change the rules to their liking.
Bitcoin was designed as a peer-to-peer currency with absolute scarcity. In the world of fiat currencies we live in, when the Federal Reserve, Bank of Japan, or European Central Bank can just print up more money on a whim, that’s huge. It turns out that in a fiat system, bitcoin is a phenomenal savings technology.
Just consider one aspect of our current financial system…
Bank bail-ins are just one of many reasons why you don’t hate our current financial system enough.
A bail-in requires depositors to bail out a failing bank.
It’s an assault against property rights, and often comes with more restrictions later. As the kids jest today, “as a treat.”
The most famous bank bail-in occurred in March 2013, in Cyprus.
The Eastern Mediterranean island’s banking system was two things: A haven for foreign investors (primarily Russian), and insolvent.
So the bank limited cash withdrawals, and imposed a levy, taking a big chunk of a banker’s deposits over the insured amount.
I first heard about bitcoin around its inception in 2009. The idea of digital money sounded interesting. But in the throes of the housing market, and lacking the computer skills needed to mine and store bitcoin, the idea languished.
The Cyprus bail-in brought it back on my radar. That’s because bitcoin prices soared following the bail-in as investors looked for a safe place to park their capital.
Bitcoin itself is safe. But bitcoin has also had its banking problems, from Mt. Gox to the collapse of FTX in the most recent cycle. And in 2013, it was still just outside the realm of my technical knowledge.
It took me until 2017 to get into bitcoin itself. The timing wasn’t too bad. Bitcoin had just popped over $1,100, topping gold prices at the time. Hell, I still thought it was a potential scam at the time. But in investing, you don’t really learn until you put some money at risk. So I did.
And later, in 2017, when prices topped $15,000 (on the way to a peak of $17,000), I sold over half my position. I’d use that capital to inch my way back in during the 2019-2020 “crypto winter.” The pandemic and stimulus measures showed just how powerful owning bitcoin could be.
And the trucker protest in Canada over vaccine mandates showed the need for a money independent from governments. So I bought more, and looked for ways to add bitcoin to my trading account.
I found it with MicroStrategy, the business analytics company that’s now best known for being a leveraged trade on bitcoin. In late 2022, near the bottom of bitcoin’s last cycle, MicroStrategy traded at a discount to its bitcoin holdings. Today, it’s a hefty premium.
Ultimately, I’m both a buyer and seller of bitcoin right now. I took a “free ride” on MicroStrategy (MSTR) ahead of the election. I’ll admit I didn’t sell at the top. But I’ll likely have other buying opportunites elsewhere. And selling 20% of a position after it’s gone up five-fold means I’ve got my original capital back to put to use elsewhere.
Currently, I’m dollar-cost-averaging actual bitcoin to the tune of $10 per day. If it drops under $50,000 again, I’ll make additional purchases outright.
But my goal is to create generational wealth. And bitcoin is a significant component to get me there.
Next year, when bitcoin is likely to hit a cycle peak, I may take a bit off the table then. And hopefully, we’ll get another 50%+ pullback to get back in.
Eventually, with the rising institutional interest in bitcoin, the big swings may go away. For now, I think we have at least one more cycle left. We’re that early. But after going from a 17-bagger in 2017 with bitcoin to a 5-bagger in 2023-2024 with MicroStrategy, the returns will diminish.
When will I sell the majority of my bitcoin? When there’s something better out there than a peer-to-peer digital money system that isn’t subject to the whims of central bankers. I’m not holding my breath. And I feel the same way about the physical gold and silver I’ve also picked up over the decades.
If you’re not looking to play bitcoin’s cycles, just set up a dollar-cost-average and let time do the heavy lifting for you. Unlike other assets, bitcoin won’t take as long, but, again, returns will only slow from here.
For now, bitcoin is still a buy. This time next year, it will likely be near a cycle peak, and it would be good to take some money off the table ahead of another crypto winter.
~~ Andrew Packer, Grey Swan Investment Fraternity
