Bitcoin 80K

As Bitcoin approaches $AUD 80,000 it's easy to regret selling some bought last year.

However, regrets like that ignore the wisdom of reducing risk and increasing investment diversification. That's why I think taking some money off the table after windfall profits can be a good idea.

So far, I have sold two tranches of crypto.

The first was to retrieve all my initial capital (plus the tax liability and a little extra profit). The second was simply to reduce portfolio exposure.

I still have some BTC and another crypto currency which, even though reduced in number, are still multiples of my original total investment.

Had I held the entire amount of my original purchase I'd be much, much better off financially but wouldn't be sleeping as soundly.

You may recall that my dabbling in the crypto currency space was to learn and understand what this new asset class really meant for investors. It was just luck that the huge run up began shortly after I suggested to Confidential readers they too should get on board.

Many of you have told me you have doubled or tripled your investment already. Some have done even better in other coins.

It's easy to feel like a genius when these things happen. I've been here before with stocks and options trading. I've also seen huge gains disappear because there wasn't an exit plan in place.

My original intent was to never sell any of my crypto and go along for the ride.

However, when something rises so much in such a short amount of time, my experience has been that a commensurate correction eventually follows.

Have a look at the chart below. It's of the US NASDAQ index during the dotcom bubble of 2000.

Four years worth of exponential gains (from 1996 -2000) disappeared when the index lost 80 per cent of its value. It took until 2016 to recover those losses and has nearly trebled since then!

Bitcoin has been on a similar ride multiple times, experiencing huge retracements before resuming an upward trend. I'm betting it will happen again but that's not guaranteed.

**The price of BTC has risen by more than 50% since this chart was published!**

However, having recovered my capital, banked substantial profits and still having some investment in the space, my risk tolerance is at sleep easy stage.

If BTC (and others) continue to rise then I have more upside. If they fall, my profits are protected and I can look for another attractive entry point.

If the crypto's go to the moon, I'll dream of the private jet I could have had and remain content with my current transport!

For me, that's the best of both worlds. I get upside participation without having any of the worries of losing. Paper (or digital) based wealth is easy to measure but it can disappear much faster than it can be made.

The old investment saying 'wealth goes up via the stairs and down in an elevator' suggests some profit taking is prudent.