A gentle reminder that taking life-changing profits may well be worth selling your whole stack

What is “life changing” money? Depends on what your goals are, and how life changing the profit would be for you.

Let’s say you’re in crypto to realise the dream of outright home ownership (as an aside, home ownership is absolutely fetishised here in Europe; so appreciate this may apply less elsewhere):

If you’ve got an amount that, by selling it, would buy you outright a nice house and cover the taxes on the crypto profits, then I can see why people would cash out and never look back.

”But, what if by holding it and not selling out on hitting that milestone, I’d have a lot more profit?”

Obviously, if you could hold it a few extra months / years and be able to do all of the above and keep a decent amount of skin in the game, we’d all rather that.

The issue becomes: if you shift your goalposts to get more greedy, thinking “if only I had just that bit more”, you run a greater risk of the value of the investment collapsing.

Best case, you spend a bit of time in the bear market thinking about whether you made a bad call, and can sell when it returns to its previous value (or attempt to try again with holding for higher profits...), but there’s always a chance the value plummets and doesn’t recover.

Personally, I think if I was cashing out for something significant in my life, the extra potential profit isn’t really something I’d care about. It becomes more of a “I bought this nice house, which I could never have otherwise afforded, when I could have had this even nicer house, and enough money to live off in various investments”. It obviously depends how early you bought in and how much you’ve accumulated, together with your goals. If you’re after complete financial independence, your goalposts are likely higher.

”When should I not cash out?”

When you’re taking profits for no discernible reason. De-risking or shifting some of the profits into other investments is a valid strategy, but you also want to be confident those investments will outperform; and you’re likely selling a percentage, rather than cashing out fully.

We see people beating themselves up about profit taking when they sell for a random amount to “lock profits in”, that makes no discernible difference to their lives. This could be selling a stack of something now that’s been held since just before the bull market for a few thousand, when there’s no immediate purpose for the sale, beyond wanting to have the profits as fiat.

Obviously, paying bills that you couldn’t otherwise afford are going to be an exception. No one wants to have to do this, but sadly it can be a reality of life.

TL;DR - don’t cash out your crypto for profits unless you need the money for previously unforeseeable circumstances, or the money is life changing for you. But, cash out if you hit that life changing money (or, a significant percentage). Don’t keep shifting the goalposts, hoping the money could be even more life changing, unless you’re prepared that you might not end up with the life changing profit