Bitcoin has been on a tear since the beginning of the year. This has led to a lot of unrealized profit for Bitcoin holders. Of course, the logical question to ask is should you pull out of bitcoin now?
The answer is complicated and varies depending on your financial situation. However, the general consensus is that you should not sell assets if at all possible. Anyway, this article will cover everything you need to know about the future price of Bitcoin and whether pulling out of Bitcoin is a good idea or not.
Pulling Out of Bitcoin is Bad
First things first, selling bitcoin is more likely than not a bad decision. This is based purely on historical evidence with the prior price of bitcoin.
Basically, the price of bitcoin has always gone up since its inception. Yes, there have been some bear markets in between price increases, but the overall trend has been upwards for the entire history of the project.
We will put it this way, if you sold at the top of the 2011 bull market, then you would likely be kicking yourself because that bull market peaked at $30/BTC.
Of course, prior performance is no indicator of future success. But there is not much indication that the price of bitcoin will stay down for a significant period of time. In fact, the data suggest the opposite.
US Fed Printing Money
The biggest indicator that you should not sell your bitcoin, or other assets, has to do with the fact that the US Federal Reserve has printed an unprecedented amount of money in response to the COVID-19 pandemic.
Most in cryptocurrency are familiar that fiat currency inflates, so we will not cover that aspect. However, most are likely unaware just how much money the Fed printed in 2020.
The Fed printed 20% of the total US money supply in 2020. Most central banks of western countries had a similar response to the pandemic, so you are not safe if you are on the Euro or Pound.
That’s right, 20% of all the money printed from the 1970s to 2020 was printed in 2020.
The obvious conclusion from the above statement is that inflation will hit the US Dollar extremely hard in the next few years as the velocity of money picks up. This means two things:
- You want minimal USD/fiat holdings because the real value of those holdings will decrease due to inflation.
- You want to hold assets that rise equally (or more than) inflation of the USD.
In our opinion, the Fed printing infinite money is the number one reason you should avoid selling bitcoin. Basically, why would you sell a deflationary asset for an inflationary currency like USD?
It simply does not make sense.
Build Cash Flow Rather Than Sell
Now, the ideal situation is to build up cash flow rather than selling an asset. Bitcoin can last forever.
Your USD is only temporary as the value slowly decreases due to inflation.
Anyway, if you really need the cash, then you should do everything possible to earn money so you do not have to sell your bitcoin. This can include the following:
- Get a second job.
- Putting your bitcoin as collateral for a loan. Though this option can be somewhat risky due to the volatile price of bitcoin.
Don’t Bet Against Technology
Our final point for holding Bitcoin has to do with technology. Bitcoin is a new technology. And new technology is always a safer bet than old technology.
A great comparison would be investing in a tech company during the Dot Com Bubble. Sure, some of the companies went to 0, but a lot of the companies became household names worth a lot of money (Google, Amazon, Apple, etc.).
Cryptocurrency is in a similar situation at the moment. Bitcoin, fortunately, appears to have taken the lead as the primary cryptocurrency of the technological revolution, which makes it a great hold as an investment.
Is Bitcoin Going to Crash?
The brutally honest truth about Bitcoin’s price is that it will most likely crash.
Again, historical precedent has shown that Bitcoin has periods of tremendous growth followed by a tremendous crash that wipes out most of the gains.
This is not the best thing in the world. The price would go up forever in a perfect world.
However, we do not live in a perfect world and must deal with price crashes. That said, you are better off simply holding rather than attempting to time the peak and trough of the market.
Attempting to time the market simply does not work.
Is Selling Some Bitcoin Ok?
Yes. Selling some bitcoin is perfectly acceptable and a relatively common trading tactic.
It usually involves waiting for 200%+ returns before selling enough to recover your investment.
The rest of the bitcoin is essentially “free” and you can hold it confidently without fear of losing any of your initial investment.
Selling Bitcoin to Buy Assets is Also Ok
Selling Bitcoin to have fiat currency that sits in your bank account earning 0% interest is pretty much the worst strategy possible.
A better strategy would involve selling your bitcoin to purchase a cash flowing asset like a rental property or a business.
That said, bitcoin still might be a better investment in the long term. It just is not as predictable as something like a rental property or a business.
That about sums it up for whether or not you should pull out of Bitcoin.
It just does not make financial sense for most people to pull out of Bitcoin into fiat currency. An argument can be made moving from Bitcoin to another asset like real estate or a business, but you would likely be better off holding your Bitcoin and using other capital for that transition.
As for Bitcoin’s price crashing, that is almost inevitable at this point. It is just something that a Bitcoin investor must accept before investing into the cryptocurrency. It helps to view a crash as a good opportunity to buy Bitcoin at a discount.