On Nov 19, I wrote down the reasons why I own Bitcoin. 1 Bitcoin at the time was about $18,000. Today it is around $37,000. More than doubled in a very short time.
Should I book profits?
This is one of the most difficult questions for me. Selling an investment. There is no right “formula” to sell (at least that I’ve come across), but I have a loose guideline I follow when I’m considering selling an investment:
“Be fearful when others are greedy and greedy when others are fearful” index: If I’m holding an investment just because of FOMO, it’s a good time to sell. I’m doing it because everyone else is also doing it is not a good reason for doing anything. As a YouTuber use to say- Don’t be a zombie.
If the opportunity cost is too high: I would consider selling if there is a better opportunity somewhere else that will give me better returns than my current investment. I should know where I will be investing the money before selling.
If the initial investment thesis proves wrong: This is by far the most important one. If the assumptions in my initial thesis for an investment prove wrong, accept the sunk cost and get out of the investment.
In my very short investment journey, I’ve tried to follow uncle Warren- I’ve been a net buyer every year. I’ve bought more stocks than I’ve sold. Probably because I buy rarely. And because my buys are infrequent and for the very long term, my sells are also very rare.
Coming back to the question- Should I sell Bitcoin and book profits?
While the “Be fearful when others are greedy and greedy when others are fearful” index is high, I don’t think it’s euphoric yet. I don’t know any other investment that would potentially return as much as Bitcoin would.
And finally, I think my thesis(read this for more details) for bitcoin still holds up. In fact, it has been nicely validated.
For these reasons, I plan to continue holding my position as of now.
Who knows, maybe a couple of months from now, I might regret the decision. But that is why I do this.
Reply to this email if you think I’m making a mistake or if you want to share your strategy for selling investments.