Exit Strategy For Crypto Millionaires and Aspiring Ones

May 13, 2021

One of the most common questions I get asked is “Do I sell X coin now?”. I try to answer it the best I can, but in reality this is a very personal question.

I don’t know your bankroll, I don’t know your cashflow and I don’t know your exposure in a certain position. These are just a few of the information points I need to adequately reply to that fairly simple question.

However, it’s a good question to ask yourself. When do you exit your positions? With the current rise of cryptocurrency prices, this is a question I’m asking myself on a daily basis. So I decided to take some time to write them down. I know a bunch of my readers can call themselves crypto millionaires by now. If you are one of those, congrats. But you’re only half way there. Make sure you’re still a millionaire when the bull market comes to an end.

If you’re not a crypto millionaire yet, keep grinding and keep reading because this might be relevant to you as well.

If you’ve already got 1 million in stocks, 1 million in Real estate, and you’re letting another million ride on crypto, you beat the game already. Well played sir.

Why Sell At All, Don’t You Believe in Crypto?

Of course I do. I’m a huge believer in Bitcoin, Ethereum and the ecosystem of cryptocurrencies.

However, if you get to certain financial levels, it makes no sense to drop below it anymore, since it will drastically change the quality of your current and future life.

You’ve probably heard wealthy people say things like, the first 100k is the hardest, the first million is the hardest etc. They say it, because it’s true.

Whenever you can call yourself financially free, it’s a level you want to maintain. For every person the net amount of money that changes the quality of their lives is different. You have to decide that for yourself. But everyone has certain amounts that matter. If you have a $100k today, you can compound that to 1 Million over 15-20 years on the stock market. That will give you a very comfortable retirement plan.

If you are a young millionaire, you’re more likely to compound that million to multi-millions over the years. There is no real rush to it, other than ego.

How much does the quality of your life change if you have 1 or 3 million? For me not much at all. But losing your million to drop back under a 100k, or even broke. That will drastically change your life in a negative way. And you might think, that won’t happen to me. But I know guys that were millionaires and eventually went broke again. Make sure to avoid that at all cost.

So whenever you get to a crypto portfolio that is becoming significant money for you, start thinking about your exit strategy.

Don’t Lose It All

So how did these guys I mentioned above lose it all?

Well, you can make a thousand perfect decisions to build your portfolio up, but it only takes 1 mistake to lose it all.

Of course, these guys didn’t bet it all on red or black. However, some risk management mistakes in combination with mental mistakes can be the equivalent of financial quicksand.

Poker players can move up too fast, start losing and never move back down in stakes.

Or I’ve seen poker millionaires lose it all on sports betting over a period of a few months.

For crypto traders, using high leverage, investing in risky alt coins or not cashing out in a bear market can financially crush you. As a trader you need to build an investment framework that fits your risk profile, but you also need to build an exit strategy that protects the downside, such as a bear market.

I know dozens of 2017 crypto millionaires that didn’t take any profits, kept everything in risky alts, and got totally crushed in the bear market.

My mental coach Jared Tendler just published a new book for traders. I’m halfway through it, and like always Jared knows how to deliver! After years of coaching, I still have symptoms of greed, overconfidence & entitlement when it comes to trading. I’d definitely recommend anyone to read his latest book. And I hope it helps you, like it’s helping me.

Altcoin Exit Strategy

BTC & ETH are my main holdings. Anything else is considered an alt coin for me.

My personal goal for alt coins is to gain more Bitcoin and Ethereum, also called “stacking sats” or “stacking Satoshis”. I buy alts, because of the chance they grow faster than the main two cryptocurrencies, and once they do I sell them back for ETH or BTC and keep some of that alt as my “moon bag”.

In 2021, the total BTC value of my holdings grew by 45%. So if I swap my entire portfolio to BTC today, I have 45% more Bitcoin than I had at the start of this year, without putting any more euros in the game. On the contrary, I already cashed out some profits to EUR.

However, those are paper profits if I don’t turn this into euros or dollars at some point. And without converting it to fiat, I’m still at risk to lose it all if the market turns against me.

There’s different categories for alt coins. Some are fundamentally strong with big marketcaps, like Chainlink and Polkadot. Some are purely hype coins, like Doge or XRP (dare I say it). And you have complete shitcoins that moon for no (fundamental) reason, like Shiba or Safemoon. There’s a bunch of sub categories as well, but I won’t dive deep into that today. The exit strategy for alt coins depends on how I categorize the alts. The more riskier it is, the earlier I want my initial investment out. While a safe alt, I might calmly cash out in steps over months.

Here’s a simplified exit strategy for alt coins, you can adjust it based on your own risk tolerance, alt category and portfolio management:

  1. Cash out initial investment at 2x.
  2. Another cash out 100% profit at 4x
  3. A third cash out 200% profit at 6x
  4. Moonbag the rest with occasional % profit exit

A quick calculation: for example, if you invest $100 in Dogecoin at $0.10. Make sure to cash out your $100 when DOGE hits $0.20, cash out another $100 at $0.40. Cash out $200 at $0.60, and let the rest ride. Just cash out percentages at huge jumps, or when you want to move some to another coin.

I used dollars in this example to simplify it, but I’m stacking Bitcoins and Ethereum, so I’m looking at BTC/ETH prices to cash out and take my multipliers there. However after the initial and first profit take in ETH/BTC, I sometimes take remaining profits in USD and that’s how I’m slowly, and partially exiting crypto during this bull run.

Cash Out 1 Million From Crypto

Now this is a different ball game.

The best strategy would be, to sell everything at the top and buy back exactly at the bottom. Many of you probably think, you will see the top coming, and that’s when you’ll cash out.

In reality though, you will know the top was hit when we’re 50% down from it. We all experienced the 20-40% dips a few times now, and personally I’m mostly just waiting on the bounce back up, with an occasional buy the dip. But when we will break major support levels to go down deeper to minus 50%, that’s when a bear trend can start for a long period of time. And it’s mentally extremely difficult to cash out when you’re 50% from your all time high, with a lot of hopium inside of you.

Or maybe you tell yourself you’re a believer, and if things go as you think they will, in the future we won’t need anything else than crypto. Dips don’t matter for the long term. So why are you cashing out?

Well, for the reasons I mentioned above. At certain levels, protecting the downside is more important than the multiplier upwards.

Exit Strategy Framework

I created a spreadsheet, where the crypto portfolio is worth 1 million. Now keep in mind, you should start an exit strategy from whatever number is significant for you, that could be 10k, 50k, 250k, or in this example, 1 million.

From my perspective, we’re in the middle of the bull market now. And I don’t want to cash out 100% today, but I want to ride a bit more to the upside. So I calculated until the cryptocurrency total market value is 6 trillion dollars, approximately a 3x from now.

In the sheet we have 1 million at a 2 trillion total marketcap. I have one big assumption to base my calculations on, which is:

  1. We grow with the market, if the total market cap grows by 100%, so does our portfolio

There is 3 different exit styles in the sheet, 25% increments , 33% increments and 50% increments. The higher the percentage of my cash out, the longer I’m waiting to pull my money out.

At the bottom you can see 2 mix strategy calculations, where I check if a mix would give me a way different end results.

I’m quite surprised with my calculations:

If you want to have a closer look, here’s a link to the sheet.

As you can see, with all the different strategies, you end up between 2M and 2.37M, with crypto exposure in your portfolio between 375k and 900k. Regardless of any strategy, you’ll always have a minimum of 1.3M cash out if we hit a 6 trillion market cap.

On the other hand, you’ll always have some exposure left in crypto. With some difference in how much money you will have left in crypto, which could simply be adjusted towards personal goals and preferences.

If we don’t get to a 6T market cap, but we crash before that, we can see how much cash we have out. At 4T market cap, we have a minimum of 800k out if we pick the first strategy. The 50% strategy has the most money out at that point (1M), but it’s also the most gambly one, because what if we do not get to a 4 trillion market cap?

I believe with the differences so small between strategies, it’s best to pick the lowest risk one. If we start cashing out 25% today, at a 4T market cap we already have 800k out of crypto. If I keep it all in crypto till we hit 4T and cash out 50% on that day, I might have 200k more, but we would be risking a full million to get it. Cause what if we get to 3T is the peak of this bull market and we hit a bear market that last another 3 years?

What is the Right Time to Start Taking Profits?

Like I said before, that’s different for every person.

However, ask yourself a few questions to figure out if you’re ready to sell some of your crypto:

  • If the market dips 10% in a day, do you freak out?
  • Are you constantly fantasy-sing what you will do with your gains?
  • Are you afraid of losing 80-95% of the money you have in crypto now?
  • Are you regularly thinking: “Should I get out now?”

Does that sound familiar? If this applies to you, I would say these are strong signals that the money you have in play, is getting to a significant level. Arguably there’s already some emotional attachment to your money in crypto. Which makes it even harder to make right financial decisions.

Making money is only half the game, perserving it is the next phase.

Final Thoughts

Keep in mind, this is just and example of how I create a framework to exit. This is not financial advice, and you should have your own strategies in place, with different increments and different points of withdrawals. Assess your own goals and levels of financial safety. The most important point I want to get across is that you start building your own framework.

In these times it seems fairly easy to make money in crypto, and we all believe we can make more. Be reasonable with yourself and set ground rules. If the money in play can change your life today, you should be working on your exit strategy.

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