Lecture 4.0.0. Practical Session on Cashing Out
An important consideration in crypto investment is to know when and how to cash out your profits. Many people have woken up one day to see their Crypto Portfolio has grown into millions of dollars.
Then, after waiting for some days, weeks or even months, in utter disappointment, they saw the value of their portfolio had shrunk to just a few hundreds of dollars! They wondered if they should have cashed out earlier.
In other words, what is the best strategy for cashing out your crypto investment?
4.0.1. Questions You Should Answer
If you are investing in cryptos, the following questions become relevant and demand practical answers:
(1). What is your idea of Cashing Out your crypto investment?
(2). At what point in your investment will you want to cash out some of your cryptos?
Suggested Answers:
When it comes to cashing out, it is an individual decision. No one can take such decision for you.
However, one mistake to avoid is: You shouldn’t just follow the crowds to cash out. That is, don’t cash out because you think everyone is rushing to do that.
When Bitcoins rose from 0.001 dollar to about 100 dollars in 2012, many people rushed and cashed out. Such rush is usually borne from fear of bubble. Many people still think the Crypto Market is a bubble that will burst one day and every crypto investor will then run at a loss.
However, realise that the crypto industry has grown and will keep growing. Imagine if those early Bitcoin investors – many of them had up to 1000 Bitcoins – still had their Bitcoins today! Apparently, they would have been one of the richest guys on earth!
In fact, a number of such early Bitcoin investors are now regretting their decision of rushing to cash out their Bitcoins.
4.0.2. Financial Vision – Your Guide on Cashing Out
Smart investors set out goals that guide their investment. For instance, the goal may be:
“I need 100 000 dollars to pay off my mortgage”
“I need 50 000 dollars to start a business.”
“I need 20 000 dollars to pay off my kid’s tuition fees.”
Of course, goals are set based on Financial Visions. Sadly, studies have shown that only about 10% of people have well laid out, clearly documented Financial Visions for their lives. Is it surprising, as such, that only about 10% in any society attain financial freedom?
This practical session requires you to take up a pen and a notebook and write down your answers to the following questions:
(1). Do you have a well-documented Financial Vision for your life?
(2). Is your Financial Vision broken down into SMART goals?
(3). How much do you need from your crypto investment to achieve each of your goals?
Remember what a SMART goal is!
SMART is the acronym for: Specific, Measurable, Attainable, Relevant, Time-bound.
In other words, your SMART goal must be specific, measurable, attainable, relevant, and time-bound.
After documenting your Financial Vision with its SMART goals, next paste it where you can see it frequently, possibly at the top of your bed.
That is God’s standard for vision and goal setting for your life. Remember the clear words of the Bible on this:
“Then the Lord answered me and said, ‘Write the vision and engrave it plainly on [clay] tablets so that the one who reads it will run’” (Habakkuk 2: 2 Amplified version).
Therefore, as an emphasis, stop further reading for now. Pull out your tablet – a pen and a notebook or any electronic device – to document plainly your Financial Vision, breaking it down to individual goals, and pasting it in an accessible place where you can see and read it out to yourself frequently so that you may be able to run with it.
4.0.3. Two Methods for Cashing Out
There are two methods crypto investors use to cash out:
First Method: Securing your Profits
Considering the volatile nature of the Crypto Market, after you have made good profits, you might want to secure the profits. The best way to achieve this is to convert the profits into a stablecoin. Commonly used stablecoins are USDT, USDC, and BUSD.
Questions you should answer:
(a). How do you convert your cryptos into a Stablecoin?
(b). Which stablecoin do you prefer?
(c). Why do you prefer that stablecoin?
(d). Where is the best place to keep your stablecoin?
If you have gone through the PSOC and the SSOC, you will be able to answer these questions. Note that by keeping your profits in a stablecoin, whose price fluctuates around one dollar, your profits will not be subject to market volatility.
Of course, the best place to keep your stablecoin is on a secure platform where you will be receiving daily profits as well. Do you know any such platforms?
(See the modules in Class 5 of the Secondary SOC).
Second Method: Fiat Currency Cash Out
Anytime you need your profits to service your goals such as buying a new house, a car, etc. you can then convert them from a stablecoin into fiat currency.
Once you have done this, be ready to pay the necessary taxes on them.
Questions You Should Answer:
(a). Is it possible for you to reduce or defer taxes on your cryptos? How can you achieve that?
(c). Is it possible to pay zero tax? How can you legally obtain this?
Note the Following Two Points:
(1). As long as you keep your profits as stablecoins, in most jurisdictions, you are legally allowed to defer taxes on them.
(2). Another way you can defer your taxes and even pay zero taxes legally is through crypto lending (see the Lectures of Course 6).
Do these two points apply in your own tax jurisdiction? If you don’t know, you can consult your tax consultants.