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It’s a lot more understandable when newbie investors are still dwelling on the profit maximization mindset when investing in Bitcoin, but as one advances and becomes more experienced and equipped, it’s important to make a shift in focus from the profit maximization approach to wealth preservation and management approach.
It is likely that each of us will continue to monitor the extent to which our BTC holdings are in profits, yet the extent to which they are in profits should not really be a great motivator when it comes to figuring out where we are at. Are we still accumulating bitcoin or have we passed into a maintenance stage. if we are in a maintenance stage we might well be wanting to preserve our overall bitcoin size, and sure we might buy and sell from time to time, yet whatever we do would not be decreasing our bitcoin stash with any kind of significance. Maybe at some point we might conclude that we are able to live off of our bitcoin or to use our bitcoin to supplement whatever other income that we have, then at that point, we might start to draw from our bitcoin based on price based withdrawals (hopefully in a sustainable way).. and/or time-based sustainable withdrawals.
Historically Bitcoin has continued to have quite a great value appreciation so that once we are at a decently sized stash.. possibly at an overaccumulation level, then likely we can figure out systems to start to withdraw from our bitcoin stash, and our withdrawal rate may well end up being way less than the amount that the bitcoin is gaining in value (even accounting for the debasement of the dollar and other fiat currencies).
Yeah, it’s understandable to monitor how profitable your investment has become, but this shouldn’t be because you wanna take out those profits, but because you wanna use that as an opportunity to assess and evaluate how much progress you’ve made with your investment and how closer you’re getting to your goals.
I quite believe that the shift from accumulation to maintenance makes a lot of sense, because you get the chance to focus on preserving your Bitcoin portfolio while still having the chance to make some reassessment and possible adjustments occasionally and when needed.
When we look at the history of Bitcoin, we’d observe that Bitcoin’s value appreciation has been very significant, and this potentially allows for conservative withdrawal rates. And this is exactly why it’s crucial to employ/initiate a sustainable withdrawal strategy when transitioning to living off you Bitcoin Stash or supplement income.
Strategies like the DCA or setting aside a fiat buffer should be considered when trying to balance withdrawal rates with Bitcoin’s market volatility. I may be wrong but I feel it’ll also be a pretty great approach to also diversify their withdrawal approach by using a combination of both the price based and the time based withdrawal strategy.
One may need to regularly stay informed at all time when preparing for market fluctuations, also being adaptable and most importantly, maintaining a long term perspective of the asset, because this is the actual thing that’ll help ride out the effects of temporary or short term market fluctuations and volatility, and lastly, it’s also very essential for investors to regularly consider their risk tolerance level and regularly adjust their investment strategies accordingly and when the need arises.