by Jeff Clark, GoldSilver.:
If you’ve made a profit from bitcoin and other cryptos, congratulations! You’re obviously a smart investor who spotted a trend early on and was able to profit. Hats off to you.
But now it’s time to take some profits… right? If you were smart enough to buy in early, you’re smart enough to know that it’s not a profit until you take it. And that asset prices don’t rise forever, no matter how revolutionary the technology.
Yes, some cryptos will gain widespread acceptance and use, but most won’t. Yes, the technology is here to stay, but that doesn’t mean prices will rise indefinitely. Yes, it’s a whole new industry that will continue to grow and evolve, but that doesn’t mean you’ll make a killing forever.
Until you book a profit, it’s only a gain on paper (or digitally). It’s important to sell some of your position to lock in a gain. Here’s why…
The Key to “Mining” Your Profits
Remember that famous line from the movie The Graduate? “One word: plastics.” Getting into that industry early made many people wealthy.
And the story of Jed Clampett discovering black gold on his property when the oil boom was heating up? The account may be fictional, but plenty of people just like that ended up becoming millionaires.
These were new technologies that changed the landscape in their day, and are still with us today—but the prices of those assets didn’t rise forever.
The big and easy money in plastics is long gone. Oil is priced less than half its 2008 high. The same is true of all new technologies; prices eventually roll over. The technology advances, but prices peak and eventually fall to an equilibrium.
History has demonstrated this numerous times. Here’s a few reminders of why crypto winners may want to take some profits while prices are high…
Computers and the internet were new technologies that forever changed our way of life. But the stocks didn’t rise forever—in fact, the tech bubble became the tech wreck, wiping out much of the gains investors were sitting on. Worse, it took the Nasdaq over 14 years just to climb back to its 2000 nominal high.
Those that didn’t take profits from that industry ended up losing their paper riches.
The price of oil has soared and crashed numerous times. This was the most recent. If you owned oil or oil stocks in 2014 and didn’t book some profits, you lost most of your gains.
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