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Why selling 100% of your cryptocurrencies is a trap?
Why do I never sell 100% of my cryptocurrencies and why is this a bad strategy? Indeed, I see a lot of people on social networks who say they have sold all their Bitcoin and today they bitterly regret it. Often unfortunately people sell all of their cryptocurrency and then in the long term, a few months or a few years later they bite their fingers. That’s why I’m going to tell you today, why I never sell all of my cryptocurrencies and why this is a bad strategy.
The example of Warren Buffet
Let’s start first with a quote from Warren Buffet, one of the richest investors in the world, who says: “our favorite holding period is forever”. In speaking thus, the wealthy and famous investor explains to us that he prioritizes the long term. He tells us that we must keep the assets in which we invest for life. The average holding period of Warren Buffet’s assets is around 20 years. As an example, he kept the coca cola stock for 25 years. As for his American Express share, he has held it for more than 33 years. I don’t know if you realize how much mental power it takes. If one of the richest investors in the world buys and sells decades later, maybe doing so might be a good idea. However, this carries risks. It is for this reason that I will list both the advantages and the disadvantages and then I will tell you how to implement this strategy in a smart way.
The risks involved in adopting this method
It should be noted that there are several risks.
First risk: It is the definitive fall of the crypto or the asset in question. And after this fall, the asset never goes back up. The stock or the cryptocurrency goes up for several months, years, decades then after there is a black sign, something that has never happened in the past and causes this asset to fall for this reason . But after that, it never goes up again. It doesn’t matter if it drops 50% or 70% and then rises again. But when the asset falls and never rises again, it becomes worrying. This is one of the difficulties of choosing never to sell your digital assets.
Second risk: You need a winning mind, a certain psychology to withstand falls. Better, you have to accept them and know that it is part of the process. You have to accept the drop in value of your portfolio for several months or even several years. If it’s a short-term drop, a few months, a few years, it doesn’t matter. Because it will eventually go up if it does. But you have to know how to hold on for all this period, all these weeks, all these months, all these years. This strategy could be interesting if you don’t mind investing in assets that never go up. I use this strategy partly in my portfolio, but not entirely.
Distribution of my capital in cryptocurrencies
I will tell you what proportion of my capital I use for this method. I use it for my buy and hold. The buy and hold technique consists in effect of buying a cryptocurrency and never selling it or selling it after one or more decades. I apply this strategy to 25% of my portfolio. So I buy every month and I never resell either partially or totally. Then, I dedicate 25% of my portfolio to active management. For this portion, the sale is made in increments. That is, I partially sell when cryptocurrencies are overpriced. I devote 25% to copy trading or copy investment. At this level, traders and investors manage the sales for you. Finally, I devote another part to staking and NFTs. The goal is to accumulate and sell over the long term.
What are the advantages of this strategy?
There are several advantages associated with not selling 100% of your cryptocurrencies.
Advantage 1: Portfolio optimization
The number 1 advantage of not selling 100% of your cryptocurrencies is to optimize your performance over the long term. We can certainly suffer losses of 50% or more in the short term. But in the long term, if the cryptocurrency market increases in value, we would have optimized its performance.
Advantage2: Savings on transaction fees
Advantage number 2 is very important. Indeed, transaction fees kill your performance. If you have, for example, 1 million euros in cryptocurrency that you sell at 100% and you buy back and then sell again several times a year, the fees will eat away at your earnings. The fees go unnoticed, but are extremely expensive in the long run.
Advantage3: Savings on tax costs
By refraining from selling all of your cryptocurrencies and opting for step-by-step sales, you will undoubtedly save on taxes.
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This text does not constitute investment advice. Do your own research and only invest the money you can afford to lose.
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