When people talk about passive income, they usually mean something that pays you regularly without touching the main asset, like rent from property, dividends from stocks, or interest from bonds. Bitcoin is different because it does not pay yield or dividends. By design, the only real way to generate income from Bitcoin today is to sell parts of your holdings
If that is what you learnt about bitcoin, it is high time you unlearn that because it is a false.
It is individual decision to decide if you want to sell off your entire portfolio, part of it or take only interests.
Maybe if you think the interest rate is not enough for your needs at the specific period you want to sell, you can keep holding within an unspecified time if your investment goal is not up to long term since it future price can not be predicted whereas, short term holding can't guarantee your profits.
That is where investors need to play the role of management including your investment approach and your bank roll so that you don't tell at lost.
So,
hodling becomes a solution to maximize your profits and therefore you can sell to only take profits while you still have active portfolio in your Wallet for future purposes.