If You Just Lost Gains In GBTC; Consider Holding (And Don’t Forget, You Invested in Bitcoin… This is Normal For Bitcoin)
If you are invested in GBTC with your 401k or IRA, and your intention is to “go long.” Then you, like the Bitcoin investor, should consider “holding.”
NOTE: Or at least consider holding part of your investment (even if you sell the rest). The exception to this rule is “if not selling now would ruin you financially.” However, if this is the case, you put too much money on this Bitcoin stock (and thus getting yourself into a more manageable position might be a better first step). Also, see disclaimers about this not being investing advice (do your own research).
The above is true even when GBTC goes from $3,500 to $1,800. The above is true even if it falls to $1k. Etc.
This runs counter to what many will tell you, that is “cut your losses” (That advice might work with other assets, but it historically has been a bad move in the crypto space) or “I told you so” (that is them being haters or wanting to feel right).
What you likely will want to do is put all of that aside and “Hold” (AKA “HODL”; a misspelling of hold which means essentially “hold on for your dear life” because there is likely good times ahead).
That doesn’t mean it won’t go down further, that just means you are going to avoid the risk of trying to sell only to buy back again quickly at a lower price, and instead you are just going put aside this idea that you can perfectly time the market and hold (because you think Bitcoin’s price will go up again too quickly for you to nimbly move in and out of GBTC timing the market perfectly).
UPDATE: The lowest GBTC went was $1.15k. It only touched that for a brief moment on the morning of Dec. 22. It then went straight to $1.65k. Unless you were liquid and nimble enough to flip out of GBTC very quickly and then buy back, you can see how “just holding” at $1.8k is not the worst advice (for someone who already held down from the top). Meanwhile you can see why I said “hold even if it goes to $1k.” If you sold at $1.15 you had zero chance of getting back in before it reversed course! GBTC could easily start trading above $1.8k again quickly. Leave timing this to the day traders.
Consider, GBTC just went from $1,000 to $3,500 in about a month (maybe even less). Hopefully you noticed that coming in. This wasn’t slow and steady growth, this was a bull run to $3.5k.
This run was intense even for crypto, as it exceeded Bitcoin’s own growth!
How could this be? Either someone was pumping it, or the demand was that great.
If the demand was so great… what does that tell you about the future?
Still, that which goes up generally comes down, and this especially true in the cryptocurrency space.
Thus, it comes with the territory if you want to play here. You have to get used to it if you want to stay in this space.
You must learn to accept the rapid rises and deep corrections. You must learn to accept that the market is hot one minute and cold the next.
You’ll hear Andrew Left and the analysts say “I told you so.” You’ll here Roger Ver on CNBC saying “Bitcoin Legacy Core is dead, buy the coin I’m heavily invested in Bitcoin Cash.” You’ll hear the media say “Bitcoin is a bubble, Ponzi fraud, smart money got out at the top.”
Well like, at this point the last top as long been missed, and further, it is in the interest of the aforementioned to say what they say.
Left shorts things (he doesn’t buy and hold Bitcoin, he shorts GBTC and blockchain stocks), Ver is one of the main backers of Bitcoin Cash (he sold much of his Bitcoin for Bitcoin Cash; he also is essentially short Bitcoin), the analysts are simply pointing out the GBTC premium (that is real, but people don’t seem to care about it in the good times), and the media is simply trying to tell a story and maintain ratings (it is true, if you can time the top and then buy low, that is smart… it is also insanely hard to see the future of course).
Thing is, as noted, if you haven’t sold yet, you sort of missed the boat on this wave.
Thus, we can’t think about the last wave, we have to keep our eye out for the next one.
If Bitcoin has another run in her (never mind if she has years left in here or is here for the long haul), we will likely see more highs for GBTC.
The only way to get those highs is to be in GBTC. You can try to sell now and buy again, but so often people fail to really accomplish that. Thus, historically, only those who hold truly ensure they are around for the next wave (true in Bitcoin, true in GBTC, true in most cryptos).
Consider this now, back in the summer GBTC traded at 100% premium or more. It went to $1.1k. Then it went all the way down to the $500s! Ouch.
Of course, you know the rest of the story. Those who held went on to see $3.5k. Those who panicked and sold went on to see losses or miss gains.
In other words the people who really cleaned up last time weren’t those short (like Left) and they weren’t those clever people who sold at the top. They were those who held through it all. This is the story of Bitcoin.
One day this pattern could not repeat, one day we could enter a bear market and it could all be over. However, there isn’t many signs pointing to this point in history being the end. Rather, most signs point to this being the next wave of adoption for crypto.
In its growth, it goes through growing pains, this is one such pain.
You don’t have to play around in the crypto space (no one is going to think you are crazy if you sell). But if you are already here, and you already held on down to $1,800, you might want to play your hand with the basic crypto strategy. That is, again, HODL (meaning don’t sell your GBTC).
I’m not saying you won’t hold GBTC into the ground if Bitcoin goes down. I’m not saying you don’t have more losses ahead of you. I am just saying, “if you didn’t take profits at $3.5k… why are you cutting losses at $1.8k or whatever the price is when you read this?”
GBTC almost shed its entire premium at this point. Its not going to go below Bitcoin ($15.3k at the moment). Meanwhile, Bitcoin is very likely not going to fall that much further.
There is a potential reality in which Bitcoin goes to $10k, $5k, or $0. In that case GBTC will result in you losing every penny you put in.
However, there is also a potential reality (and history says this one is more likely to occur), where everyone goes home for the Holidays and shows their friends and family how to buy Bitcoin… Then we go on to see $25k BTC. Even at no premium, that puts GBTC at $2.5k.
Then there is this world in which GBTC does exactly what it has been doing. That is, it flounders around a bit, forgets to track Bitcoins price, and then on the next wave actually outperforms it.
If you wait for one of those two positive events, rather than selling now and potentially regretting it, then you have a chance at something bit (rather than the assurance of cashing out now).
Also, if you can’t hold through this one event, then good luck seeing the all time high of Bitcoin. This stuff happens at least once a month on average.
Let’s put it this way. GBTC probably isn’t going to recover quickly, so you are going to have to sit around with some sadness for a bit.
However, if you think this is sad now, try watching GBTC and Bitcoin go on that next bull run without you.
Generally FOMO (Fear of Missing Out) makes us buy at the top and then feel regret. That feeling sucks. However, the feeling of watching Bitcoin actually run off without you after you took a loss (loss of principle or gains). That is the one that really stings.
Nothing stinks more than listening to Jamie Dimon, Left, Schiff, and Ver and selling your Bitcoin / GBTC only to watch it go to $20k.
I’ve lost money in crypto, I’ve gained money in crypto, I’ve bought high and sold low, and I’ve bought low and sold high, and I’ve held.
Buying low and selling high makes you feel smart for a day, holding and winning makes you feel like a rock start, the rest sucks.
In other words, the best feeling isn’t being clever in a moment, it is holding and being rewarded for being a risk taking adventurer who believed in a technology when others did. Meanwhile, the worst feeling is selling low and then watching a coin you believed in run without you (while a set of newcomers see gains that should have been yours “gah!..”).
When the old timers tell you about how they had so many coins but sold them at X point. Their story tells you one thing. It tells you that “they should have held.” Great, you had a $1 Bitcoin and sold it for $1000 in 2013. You must have felt clever, and you were. However, history now shows it you could have held it to $20k. Thus history shows exactly how clever selling at the top really was.
Holding through the pain and coming out the other end happy is an initiation process that every Bitcoin investor must go through if they want to stay in the game (historically, literally, everyone who has Bitcoin today has held or bought recently; this is necessarily true due to the price volatility).
Everyone you meet who tells you about their Bitcoin gains either bought recently and hasn’t known pain yet… or is forgetting to tell you about holding through downturns and learning hard lessons by “cutting losses, or taking gains.”
Look, if you are making short term plays, then I hope you already set your stops (trailing stops or otherwise). I hope you took profits. However, if you messed that up or are going long. Then consider the best advice of the crypto community, “holding.”
It is human nature to only talk about the good parts. It is human to want to feel good all the time.
Reality is not good all the time.
Holding and watching gains go away on paper is sad. However, realizing those losses and learning the lesson that “you should have just held” the hard way is even sadder.
You have to make your own choices here, but just remember, the adage “HODL” doesn’t come from nowhere.
If you can learn the lesson from the community, and avoid learning hard lessons for yourself, then you could very well end up being better off.
Either we are all going down with the ship, or we are all going through some rough times to make it through to the other end.
If you invested in Bitcoin in the first place, then it probably makes sense to remember why and be willing to go down with the ship in hopes of making it through to the other end.
If you can’t stomach that. Then ok, sell now and set some buy limit orders at lower prices. Just, if they don’t fill because Bitcoin rebounds over the holiday, then next time, remember, “the answer is generally to hold.”
TIP: Clearly I’ve tried to convey the general wisdom of holding and have not given actionable investing advice. Ultimately you need to make your own investment choices, i.e. standard disclaimer about this not being investment advice, it being non-professional opinions, for entertainment purposes, me not being you fiduciary, etc. i.e. Don’t blame me if you do hold and Bitcoin goes away for ever, but do feel free to donate some satoshis if you hold it it ends up making you rich 😀 … Kidding, no need to do anything, just make the choices that are right for you, and if you choose well (or end up with regret) then pass along the wisdom of “holding” and pay it forward when you get a chance. It’ll work every time until it doesn’t.