Bitcoin: Buy, Sell or HODL?

As Bitcoin sets new All Time Highs, what’s the right move?

I’ve been writing and talking about Bitcoin for some years now and I can always tell what stage of a market cycle we’re in by the questions I’m asked and how frequently I’m asked them.

Most of the time, for example, if I’m out with a group of friends or colleagues (back in the days when you could actually do this) Bitcoin will not be mentioned for fear that I should “go off on one” for a solid ten minutes or so. Even all these years later, although I have gotten better, I have to admit that this still happens occasionally.

However, when something is going on, that situation could not be more different from — literally — the moment I arrive. If the price is rising, I am inundated with questions about whether to buy and how much, and, conversely, if the price is falling I am grilled about selling and “when to get out.”

Experienced traders and investors will, of course, have noticed that these two questions are entirely the wrong way round. You buy when it feels exactly like you shouldn’t — especially if confidence is low and the press is negative — and you sell according to your own plan, not necessarily when price dictates.

The fact that this is so hard for us humans to do is exactly why the markets — literally a collective summary of individual decisions— move as they do. It is also why simply understanding this gives you such a head start in the first place.

Be that as it may, this holiday season I have been asked the “buy” question by those who do not already hold Bitcoin and the “sell” question by those who do. In fact, a casual asking around of my Bitcoin colleagues has revealed a similar pattern.

Bitcoin is in the news and the price rising quickly. Institutions are greedily hoovering up every spare coin they can lay their hands on, but retail activity has been lack luster so far.

And, it seems, those who are thinking about dipping their toe are looking to people like myself to make the decision for them.

That’s a terrifying responsibility and not one I am prepared to take on directly. I am, however, happy to discuss the options and help anyone who wants to hear them work out what’s best for them … and that's what this article is about.

So, if you don’t hold Bitcoin and wonder if you should or if you hold Bitcoin and are wondering if you should sell now the price is at an all time high, then here’s a few things to think about.

I’m not holding Bitcoin, but thinking of buying. Should I?

It’s quite the question isn’t it? You’ve probably watched the price head forever upwards over the last couple of years and find yourself in the classic “holding on to a rope attached to a rising balloon” conundrum. At what point do you take the plunge? Do you even try? Is it simply too late?

Looking back and thinking “if only” won't help you and, to give you some reassurance, everyone who holds Bitcoin wishes they’d bought more and bought earlier, myself included. But, in reality, the whole thing is an illusion designed to chip away at your confidence.

For example, by the time I’d really got proper skin in the game, Bitcoin was already getting close to $1000. However, I’d stumbled across it in late 2013/early 2014 and actually had the chance to buy it at around $100 but decided against it. I simply wasn’t ready. It seemed a bit, well, “iffy.”

That was an expensive mistake and it would be another 3–4 years before I really understood it enough to take the plunge. Understanding it properly is the barrier that everyone experiences, so don't beat yourself up about it.

As a result, I ended up paying what was considered top dollar at the time, but what would now be considered a very cheap price. If, for example, I offered to sell you a whole Bitcoin at $1,000 today would you take it? Of course. It’s all relative.

So think about this: if you knew — categorically — that Bitcoin would trade at $100,000 in the next 12 months would you buy it now at $31,000? With that sort of guarantee you probably would but, sadly, I can’t provide you with one. Like me, and everyone else, you’ll have to take the chance and decide on the odds of that happening through your own research.

The point here is that it is not too late, the numbers are simply different. As some of my colleagues put it “Bitcoin has no top because fiat has no bottom” and any cursory understanding of what is currently happening with our financial system reveals that to be truer than any of us would like to acknowledge.

Let’s not forget the fiat cash system we use now is only 49 years old. It’s still an experiment. It’s actually younger than me!

All of this, however, is about context and removing some of those barriers to thinking, the ultimate decision is, of course, yours.

In my own case, as someone who acquires more Bitcoin every single day and never converts it to fiat (cash), it’s pretty clear what decision I’ve made as it aligns nicely with my financial set up, belief in Bitcoin itself, objectives and plans for the future. But that doesn’t mean it’s necessarily right for you.

So, consider the following:

Do you have cash savings in the bank that are losing value due to inflation and lack of interest rates? If so, research what’s likely to happen in the future as this situation develops and then assess your appetitive to risk.

Of course, even this is not straightforward as risk itself is subjective.

For example, people in economies who currency has been devalued by central government are actively looking for a way to protect their wealth and usually consider Bitcoin a much lower risk than holding cash. After all, they know categorically that the cash will definitely devalue to nothing in a short time, whereas Bitcoin almost certainly won’t.

That’s an easy call to make in those situations and it’s surprising to see just how much of the planet is in this position, something I covered in detail in this article.

But here’s the terrifying thought: ALL currencies are devaluing. They always have been of course, but now it’s happening faster than at any point in history as governments print money to try and pay for the effects of the pandemic. It doesn’t matter which currency you’re using. It will be worth much less next year than it is today. You have to protect your wealth.

Some also consider holding gold a risk due to governments around the world having taken it suddenly in times of financial turmoil, like those we’re experiencing now. Could it happen again? Of course, but that’s no guarantee it will. It might be a “nothing” risk.

What is it you could afford to lose if it went wrong? What is it you want to do with this Bitcoin thing? Is it to get out of the fiat system completely, or to make a few bucks with a quick buy and sell? Or is it somewhere in between? Do you just want to be part of whatever this thing turns out to be?

All key questions designed to make you ask that most important of questions:

What is your objective?

Once you have that, you have everything you need. None of us can know the future, this is all about assessing likely outcomes and matching it with your own beliefs. Literally no-one can make that decision for you, least of all me.

But I will add one more point.

Bitcoin used to be very difficult to buy, hold and sell “back in the day” and no-one was sure if it was even legal, but things have changed massively and continue to improve daily.

In most countries Bitcoin is now legal, has a clear tax framework and is as easy to buy and sell as anything else on the internet. Those physical barriers of it being “too hard” to do are long gone, all that remains are the psychological barriers linked to your own objectives and risks.

Therefore, you can feel free to explore exactly what it is you want to do, rather than worrying about how to do it.

And for some of us, that’s sometimes just as important.

I’m holding Bitcoin, but thinking of selling. Should I?

Since Bitcoin is at an all time high as I’m writing this, it’s a given that you’ll be showing a profit (in fiat cash terms) regardless of the price you paid for it. Congratulations!

But the decision making doesn’t end there, does it? Should you lock it in and realize the cash gain even though this removes you from however this plays out going forward? Or hold and hope you got the decision right for the long term? Perhaps you should add to it as you’ve done so well? What’s the right call?

Again, this all comes down to what your objectives are. If it’s to make a few quid, then there’s no shame in taking that profit and enjoying it and, since Bitcoin’s price can fluctuate quite significantly at times, it might be possible to make another trade at a lower price later on.

But then again it might not. I know as much as you do.

If you need the cash for any reason (for example, you’re under financial pressure) then by all means take it out and use the cash to make that pressure go away. Find a way to get there later on. Well, if you want to that is.

But let’s say you don’t need the cash and you think Bitcoin happens to be a cool thing that might go even higher. In that case, you’re probably made up your mind to hold already, but you might also be thinking about adding to your stash.

But if you’re already in the game, you already have an advantage over an above the fact that you’ve already got a lower entry point that your new possible exit point. In my view, it’s essential you maximize your position.

Many people, for example, don't realize that you can get interest on your Bitcoin holdings, paid in more Bitcoin. Most wallets and exchanges now offer this as standard and I often recommend checking out Blockchain.com and Luno. The interest rates on these are 4.4% and 4% respectively, both calculated daily and compounded monthly, the latter having the advantage of being extremely user friendly and ideal for beginners.

But there are other options too. For example, Nexo and Celsius offer higher rates, running as high as 12% compounded daily, with the added bonus of $100million insurance policy. That last point is important, especially as most banks don't offer that level of guarantee. Even better, it’s possible to borrow against your assets at any time, as long as you have enough value to cover what you’d like to borrow.

Make no mistake, a whole new world is here and developing very quickly. We might still need banks for various payment mechanisms, but no longer for saving and borrowing. It’s quite the change in mindset.

This list is not designed to be exclusive and there are yet more options out there, but in my view, any of these are ideal if you’re looking to maximize your existing Bitcoin position without committing more fiat capital.

But if you are looking to commit more funds, wallets like Luno also allow you to Dollar Cost Average (DCA) assets like Bitcoin. In other words, you can set a fixed amount each day/week/month to be swapped to Bitcoin automatically which is an historically proven and lowest risk way of doing it over a long period.

However, this still doesn't answer the question of whether you should be doing it and, while you may read this article looking for that single instruction, you won’t find it. That part of the decision firmly lies with you.

At the end of the day, to quote that old adage:

You pays your money and you takes your choice.

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Bitcoin’s supply is extremely scarce and each day that goes by it gets harder to obtain. But does that means we’ll ever run out? Not exactly.

If you still don’t own any Bitcoin, you may want to consider this article. A tiny investment could make all the difference — but time is of the essence:

Still worried that Bitcoin might go to zero? That’s almost certainly off the table now. Here’s why:

Disclosure: The author of this opinion piece has been heavily involved with bitcoin for several years and holds a substantial cryptocurrency portfolio, including bitcoin. He also has a mining operation running the SHA-256 algorithm based in Siberia and is a published author on the subject of promoting the understanding of cryptocurrency. Jason is an analyst at Quantum Economics. This article first appeared on Voice.com

Disclaimer: This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. If you found this content interesting, and have an interest in commissioning content of your own, check out Quantum Economics’ Analysis on Demand Service.