Odds are good that you have not been wealthy up to this point in your life, and likely don’t have a lot of insight into how wealthy people manage their money. Neither did I, but I have been slowly learning and piecing it together.
Reasons to Sell Your Bitcoin
You have a hard asset you are going to purchase. This could be a house, land, business, gold, silver, etc (no judgement here). Preferably you are buying something that is harder, appreciates at a faster rate, or generates more revenue than your bitcoin will.
The cash could save your/family member’s life? (medical, etc)
Pay off outstanding debt on your house, car, etc.
Reasons to Not Sell Your Bitcoin
You will pay Capital Gains tax https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates
- If you’ve held for less than a year, it is taxed at your ordinary income tax bracket
- If you’ve held for more than a year, the (current) maximum tax is 20%.
Trading an asset/bitcoin for a tv, a vacation, or other whim is a waste of the asset. There are better ways.
Wealthy People Use Their Assets as Collateral
- With a collateralized / asset-backed loan:
- Get access to cash/line of credit
- You don’t have to sell your asset/bitcoin
- You still have your bitcoin
- You still allow your bitcoin to appreciate
- You don’t incur capital gains tax, this is a huge savings
- You pay no tax on your loan
- Use the loan money to buy asssets that generate revenue (real estate, businesses, etc)
- Pay back the loan with the revenue
- Now you have your bitcoin and your revenue-generating asset
- Here is an article discussing how wealthy people use valuable art to collateralize large loans. https://www.latimes.com/business/story/2019-07-31/art-secured-loans
Use Your Bitcoin to Borrow Money, Then Buy Revenue Generating Assets Rich people use their assets to get loans, then they use the the loans to buy assets that generate revenue. That revenue is what they use for living expenses. If you cash-out your bitcoin, it is gone forever.
If you take out a loan, buy a revenue generating asset, then repay the loan:
- You have new revenue-generating asset AND
- You still have your bitcoin - which can then be used to take out another loan for another revenue generating asset.
Bitcoin to Loan to Real Estate BRRRR Example
- Wait for high & relatively stable BTC valuation
- $100k/BTC, possibly after 2024
- $1MM/BTC, possibly after 2030 ?
- Take out collateralized loan against BTC
- Keep the % VERY LOW (10-20% of some of your BTC) so you do not risk a call
- Invest the loan into a BRRRR property
- Do the BRRRR ( https://www.biggerpockets.com/brrrr-book )
- Refinance the property (part of BRRRR)
- Pay back as much of the Bitcoin loan as possible, with the refinance money
- Pay back the rest of the loan, over time, with rental revenue from the property
- Repeat the process