The Bitcoin HODL Trap

There's going to be a point very soon during this bull run and perhaps some people have already reached it; where they have made giant profits in cryptocurrency.  For many people; this will be an amount of money that they never dreamed possible for them to achieve.  It will be life-changing amounts for them.  Now life-changing is a very broad term that could mean a wide-array of things for each person.  For one person it could be finally giving them enough cash to stash away and save and make each day less stressful.  Having money just in-case can resolve a lot of stress.  For others it may be finally paying off their credit card debt, something that can be really crippling.  For others it may be buying something that they have been wanting for years such as a new car, or putting a down-payment on a new house.  And of course for some, these life-changing gains might be enough to retire from your own job, start your own company or just live the easy life.  Each person is going after their own goal and this is why many of us are in the cryptocurrency market.  Of course there are those of us who have "seen the light" with bitcoin and other cryptocurrencies who believe in it so much that we never plan on selling.

The point of this article is that the cryptocurrency market moves incredibly fast and you need to have already decided which result you are going after.  If you try to decide on an impulse in the moment, it is highly-likely that you will be unable to make a decision or perhaps make a decision that you will regret as time passes.  Perhaps you will see the price of crypto rising and say "just a little more and then I will finally sell."  The problem with this is that people who haven't fully thought out their plans often don't stick to them or become very greedy.  They will say just a little more, and then the price begins to drop.  While the prices drop, they will think, "it definitely will go back up." But it doesn't and instead the price has dropped deeper.  Sometimes these people will then panic and then sell once the prices have dropped severely.  These people often have regrets as time goes on about how much money they missed out on.  Now you may be wondering, "wouldn't a person who makes a plan and sells at their price target, even when the price goes up further have the same regrets?"  

And I would say that is a very valid question.  But, then you need to remember that these people who sell at their targets are selling for life-changing purposes.  If someone is able to use cryptocurrency profits to be able to eliminate all of their debt and get their life back on track, I think most of us would urge them to sell, or at the very least agree that it was a great endeavor for them.  If someone was able to sell and buy their dream house, or start their own dream business.  Again, I think we would all urge them to go ahead with it.  I think we sometimes all fall into the HODLER's trap.  We have all preached and been preached to about the importance of HODLING your crypto for as long as possible.  That selling in the short-term would be very stupid thing to do.  And to a certain extent I still agree with that philosophy.  After all, I think bitcoin and ethereum are pristine assets that everyone should strive to own.  These are assets that people are only going to be able to dream about owning in the near future, and if you don't sell them you will be able to take advantage of them by lending them out for profits or using them as collateral to get loans.  This way you wouldn't have to sell.  Not even to mention the insane price accumulation that I believe we will see very soon.  We all don't want to be the people who sold Amazon stock during the DOT COM bubble, or the person who paid for 2 pizzas with thousands of bitcoin. We've been taught that if we HODL, the value will increase and we will be rewarded for it.  Always remember this key point.  If you denominate your value in dollars or any other fiat money, you haven't made a profit until you sell your crypto back into cash.  The gains that you have right now are just gains on paper.

This might seem like a bearish take, especially coming from me.  Someone that is one of the most bullish people out there.  The reason why I'm saying this is that I don't people to miss out on amazing life-changing opportunities just because they might be able to get more in the future.  Remember that those future prices are not guaranteed.  Just imagine the regrets that a financially struggling person would have if they finally were about to get ahead because they made giant crypto profits, only to hold on too long and not sell.  I know that would haunt me for a long time.

Now with that said; here is what my plan is. It might sound hypocritical based upon my article, but I am one of those people that will probably never sell.  It's a HODLER's life for me!  But, there is a chance that I could be wrong with how bullish I am in crypto and the world could move in a different direction.  Remember that what is right for me, may not be right for you.  Now, just because I don't plan on selling my cryptocurrency, that does not mean that I will never be able to take advantage of the profits that I am making.  Because I'm so bullish, right now I am accumulating as much as possible by spot purchasing, lending out crypto for interest and staking.  In the future I may take a portion of the passive crypto income and HODL it and also sell off part of it as well.  But the option that would be more likely for me would be to use the my crypto as collateral and take out loans against it.  This would save me from needing to capital gains tax.  I'm also one of those people who believes in a bitcoin and cryptocurrency future.  I think that we won't "need" to sell bitcoin. Just like in the famous bitcoin matrix meme, we will be able to use bitcoin for everything and would be able to use it just like you use cash today.

The main point of this article is that you really need to decide what you are trying to achieve. Write that goal down on paper and write how much money you would need to do so.  Perhaps you would then include a sell target price.  If you are a HODLER, perhaps there is a certain accumulation number goal that you are striving towards, or building up a certain amount of passive income from crypto each month.  Whatever your goal is, figure it out now and you will have a much better chance to achieve it.

How about you? What are you trying to achieve with your cryptocurrency?  As prices continue will you sell or continue to HODL?

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As always, thank you for reading!