Sell and re-buy? When we talk about passive income with bitcoin, it's because you've reached a level where you don't have to repurchase. Since you gave that example, I'll give you another: you bought 1,000 bitcoins more than a decade ago, and with your lifestyle, you only need 1 bitcoin a year to live (at current prices). All you have to do is click twice when you need to sell.
You definitely need to have a target. But it's best not to reduce your BTC holdings unless you really need to. You can sell and then buy again, by understanding the halving period bull and bear sites to make more BTC. I understand that passive income is income without active or ongoing involvement, so the money works for you even if you are not working directly. But remember that BTC is highly volatile, and just holding it will cause us to lose money at certain moments. So I think it's not quite suitable to use Bitcoin as passive income, unless, for example, you use the Staking feature on an exchange.