In the online exchange last weekend, when answering a reader's question about whether to still keep 25% of the position and never sell, I talked about the different ways I might handle things after this round of Bitcoin reaching its peak.
This question was also raised by readers at the end of the article in the past two days.
In the previous cycle when the bull market was approaching frenzy, I had mentioned in the article that I would take two measures: one was to set a high-level sell order, and the other was to at least keep (about) 20% to 30% of the position unchanged and never realize the gains, keeping it forever.
The reason I kept a portion of the position unchanged in the past was based on my long-term bullish view on Bitcoin and Ethereum, with the long-term referring to at least the next 10 to 20 years.
The painful cases over the past decade have left us with countless lessons: the vast majority of Bitcoin holders who cashed out along the way have perfectly missed the once-in-a-lifetime opportunity that Bitcoin could have brought them - most of them were forever missed the subsequent larger gains due to the temptation of short-term trading.
I am also worried about making the same mistake, but I also know that I may not be able to resist the temptation of short-term trading, so I have set a rule for myself to always hold a portion of the position.
In previous articles, I have said more than once that after reading the books of predecessors like Buffett, Munger and Fisher, I have a different understanding of the strategies of "long-term holding" and "buying low and selling high".
"Long-term holding" does not mean mechanically holding a position forever without selling, but rather that in many cases, based on the criteria these predecessors used to choose those positions, the timing to sell is actually not that often.
"Buying low and selling high" may seem to be price-driven behavior on the surface, but at its core, it has a completely different thought process.
What many people call "buying low and selling high" is actually the decision made by investors based on their prediction of market trends. However, countless cases have shown that except for a few geniuses, most investors are unable to accurately and consistently predict the market in the long run. And once a prediction is wrong, all the previous gains of the investor may be wiped out.
Then what about the "buying low and selling high" of these predecessors?
Their "buying low and selling high" is not a decision based on predicting the future trend of the market, but a decision made by comparing the "intrinsic value" of the positions they hold with the market price.
We can clearly see the contrast between these two ways of thinking through a simple example.
For example, if the price of Apple stock today is $200.
If the decision is based on predicting the future market trend, the operation would be:
I estimate the market will fall tomorrow, so I will sell Apple today; I estimate the market will rise tomorrow, so I will buy Apple today.
If the decision is based on comparing the intrinsic value of Apple and the price, the operation would be:
I calculate that the actual value of Apple is $500, so I will buy it today; I calculate that the actual value of Apple is $50, so I will sell it today.
If we think about Bitcoin in the way these predecessors do, then my core logic should be to estimate the "intrinsic value" of Bitcoin, and then compare this value with the price to derive my operation.
The specific thinking process is roughly as follows:
As I mentioned earlier, I am bullish on Bitcoin's development for at least the next 10 years, so my fundamental starting point is to estimate Bitcoin's value over a 10-year period.
If I calculate that Bitcoin's "value" will reach $300,000 per coin in 10 years, then there is no need to sell it at the current price of $100,000. Moreover, within these 10 years, even considering a safety margin, Bitcoin below $200,000 is cheap and worth buying.
Based on this logic, theoretically, as long as Bitcoin does not reach $300,000 within these 10 years, I should hold it without selling.
So rationally, it is very clear what I should do, putting aside emotions.
But I know that my habitual thinking may make it difficult for me to accept this approach in the short term, so I can try to gradually change my habits - starting from this cycle.
So in the online exchange, I mentioned that if Bitcoin's price continues to hit new highs next year, as long as it is not too exorbitant, I will increase the proportion of my permanent holding, such as reaching 40% or more.
