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  • 💡 Is this the best time to sell?

💡 Is this the best time to sell?

PLUS: crypto bounces back

GM everyone. This is 2036.

The market’s taken a breather. Bitcoin is back up around $65K.

MICHI—which I talked about on Monday—is up +105% this week. Congratulations if you participated.

💡 MICHI was already up +140% over 24 hours when I wrote about it… so if you still think you shouldn’t invest in things that have already pumped, here are two write-ups (link, link) on why it’s better to throw fuel on an existing fire than to chase duds.

Now - it’s too early in the cycle to sell.

But this week, I came across a different approach to selling that I thought I’d share.

It divides investors into two groups: those who need the money and those who don’t.

The approach is based on crypto’s exponential growth.

If you own crypto, that’s great. But if your best friend also uses crypto, crypto becomes even more valuable to both of you.

This is (a simplistic view of) Metcalfe’s Law, which governs how many Internet networks are valued.

Extrapolating Metcalfe’s Law into the future, it’s not totally unreasonable to believe that with increased adoption, crypto could move from a $2.5 trillion market cap to $100 trillion or more.

If you zoom out of monthly and even yearly fluctuations, it’s an up-only decade-long trend 📈

This means you want to invest as much as possible for as long as possible.

But here’s the problem: once you take profits, it’s psychologically difficult to re-invest all your profits back into the market — even at lower prices.

And so most of us stop the compounding.

But if Charlie Munger taught us anything, it’s that the first rule of compounding is to never interrupt it.

So, how do you deal with that?

Well, here’s a potential solution…

1/ If you don’t need the money….

don’t take profits this cycle. 

Instead, optimize your long-term compounding by doubling down when things are cheap.

Be prepared for the drawdown that will come after the bull market. The next bear market could drag us down 80-90%. Expect it and be ready to deploy capital. Buy the dip.

Last year, I wrote that the only way to make 20-50X in one cycle was to:

… well, this is when you do #3.

2/ If you need the money or want to take some lifestyle chips off the table…

Consider this: we don’t know exactly when the top will be or what it will look like.

But we do know it’s likely to be either:

  • sometime in Q3 or Q4 2025, or

  • in Q4 this year

a top in Q3 (August) 2025

a top in December 2024

We also know that there is usually a big rally at the end of the year after the US presidential elections.

So, instead of taking profits based on sentiment or price, you could take profits based on time.

You could take 1/3 off the table by the end of this year, and another 1/3 between Q3 and Q4 2025 if we get a huge pump to finish the cycle.

This helps you:

  • take off the pressure, derisk your portfolio, and secure your lifestyle in case the market tops in Q4 2024

  • maintain a position in case the cycle expands into 2025 and retake profits if it ends in a big pump

  • keep at least 1/3 of your position permanently in crypto to capture the long-term compounding gains

Honestly, I hadn’t seriously considered a time-based approach to profits before.

I’ve always preferred sentiment and price.

But a time-based approach makes a lot of sense because it:

  • helps remove some of the pressure to time the market

  • neutralizes the psychological torment you’ll ultimately feel (’but what if it goes higher?’ etc.)

… and if it resonates with you, it’ll ensure you both take some chips off the table and participate in the greatest wealth creation in history.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.