Will bitcoin’s mainstream adoption see the light of day? Until that day arrives, is there a suitable time for selling your BTC and cashing out?
Some cryptocurrency investors trade bitcoin and other altcoins in and out of the market on a daily basis to make quick short term profits. Others plan to HODL bitcoin for the long term.
When then, for these HODLers, would be a good time to sell their bitcoin?
HODLers are people who HODL, an endearing term which is explained here.
N.B. This article was written in mid-2019 and the previous all-time high was close to $20,000
Options, Options, Options…
For the HODLers, some of the options for consideration are as follows:
- Sell bitcoin for cash when 1 BTC is equivalent to its previous all-time high of $20,000.
- Sell bitcoin for cash when 1 BTC reaches $100,000.
- Sell bitcoin for cash when 1 BTC reaches $1 million.
- Don’t sell but use bitcoin as a payment method once it has gained mainstream adoption.
There isn’t really a correct or wrong option, and as we will discuss below, the choice will somewhat depend on a few factors. Let’s consider each of the scenarios above, and the reasons why we would pick each.
When Should I Sell My Bitcoin?
Sell When 1 BTC = $20,000
This is one of the likely routes you may take if you had entered at the previous all-time high and is looking for a time to cash out to end any possible risk of being back in the red in the future. However, doing so would end the reason for being invested into bitcoin in the first place.
If you had bought a bunch of bitcoin in the low hundreds or even the low thousands, selling 1 or 2 BTC at $20,000 sounds like a good way to take profit or regain back some (or all) of your capital, thus reducing (or eliminating) your investment risks.
Example: You bought 10 BTC at $2,000 each for a total of $20,000. At 1 BTC = $20,000, you convert 1 BTC back to cash to recoup your capital completely, and keep the remainder of 9 BTC for the other scenarios below.
Sell When 1 BTC = $100,000
If you’re a long-term investor or HODLer, you could be looking at the $100,000 mark before you decide to take some profit.
If you had bought 1 BTC at $5,000 in Q2 2019, selling 0.5 BTC at $100,000 would already fetch you 10 times (or 1,000%) your initial investment.
If you would like to eliminate risk and still be in the game, you could sell 0.05 BTC to recoup back your entire capital, and keep the remaining bulk of 0.95 BTC. That’s still plenty of skin in the game, now with zero risk.
Sell When 1 BTC = $1 Million
We’d like to believe John McAfee’s $1 million prediction by end of 2020, but we’re more conservative and prefer to take Tim Draper’s $250,000 projection by 2022 with more grains of salt.
Oops! I predicted $250k in 2022. My tweet last night was missing a zero. $250k is the number!
— Tim Draper (@TimDraper) April 13, 2018
Nevertheless, we’ve seen how cryptocurrencies have behaved over the last so many years, and do not discount McAfee’s prediction entirely. Outlandish as it may be, we’d like to keep this figure for another 5 years or so. Not 2020.
When I predicted Bitcoin at $500,000 by the end of 2020, it used a model that predicted $5,000 at the end of 2017. BTC has accelerated much faster than my model assumptions. I now predict Bircoin at $1 million by the end of 2020. I will still eat my dick if wrong. pic.twitter.com/WVx3E71nyD
— John McAfee (@officialmcafee) November 29, 2017
$1 million just seems like a nice round figure to cash out, in part or in total.
Maybe if you had 5 BTC, you could cash out 60% (3 BTC) to a cool $3 million, and leave the remaining 40% (2 BTC) for $10 million. Or whatever.
Use Bitcoin As Currency After Mainstream Adoption
In this scenario, we are of course assuming the entire Bitcoin project succeeds as intended, and it enters into mainstream adoption eventually and lands in the hands of a large number of the world’s population.
We suppose that by the time it gets way before the $1 million mark, it could likely have been in mainstream adoption. Let’s say at $500,000.
So back to the 5 BTC, you could cash out say 2 BTC at $500,000 each for a cool total of $1 million, and save the remainder 3 BTC in bitcoin.
At $500,000, a $2 cup of coffee would cost 0.000004 BTC and a fancy $100 dinner would cost 0.0002 BTC. Assuming BTC doesn’t even move upwards anymore at this point, it would take a while before you completely deplete your remaining 3 BTC holdings.
And if it should suddenly drop by 50% to $250,000, the aforementioned cup of coffee and dinner would set you back a “whopping” 0.000008 and 0.0004 BTC.
Assuming bitcoin hasn’t yet shed its volatility yet at this point and continues to climb to $1 million, you could probably have all the coffee and fancy dinners you want for your entire life and the next.
Amidst Speculations and Assumptions
Of course, the above scenarios are all conjecture at this point, but it’s not as far-fetched as anyone who has been in the cryptocurrency space long enough would think or imagine.
There are less than 4 million Bitcoin left to mine. What do you think the value of the last Bitcoin will be? Thousands of miners spending, in some cases, millions of dollars each to find it. Can the value be less than the effort? The value would have to be hundreds of millions.
— John McAfee (@officialmcafee) August 6, 2018
We have also made some assumptions that bitcoin will continue to reach new highs over time as had been demonstrated over the last decade. As it gets into the hands of more people eventually, it would reach critical mass, be less volatile approaching that of the forex market or precious metals. We project bitcoin mass adoption to only be a matter of time.
We often get questioned a lot about when the right time to sell bitcoin is. There isn’t a direct “one size fits all” answer to this. Different people have different risk appetites and risk aversions, with different investment profiles and portfolios, as well as different buy-in prices and capital allocations.
With the emergence of digital sovereign currencies in the offing, HODLers could also see their BTC as a store of value, and convert out to spendable digital currencies along the way.
With bitcoin rising over previous yearly lows every year, this way of cashing out could just be the best way to go about it, assuming you bought it at the right time of the year and held it long enough.