Looking into two phrases, stick or twist, basically. Which is better?
Diamond hands is a phrase that people who invest in cryptocurrency have most likely heard of, meaning never to sell your bags of investments and not to take profits. Some investors use this strategy; many seem to hold it as a badge of honour. Is this never-sell strategy a good way to maximise your gains as an investor, or is being a paper-handed profit taker a better way to go?
Let's look at a fictional story of Diamond Dave and Paper Paul using the real-life Ethereum chart to see who would have faired better over the last 5 or 6 years. I haven't used the exact lows or highs as this is unrealistic; I have used round numbers for ease.
Both Dave and Paul will buy $3000 of Ethereum on 1st October 2017 for £300, so they both will start with 10 Ethereum.
Diamond Dave's Story
Dave became interested in cryptocurrency early on and finally took the plunge to buy some Ethereum in October 2017. He purchased 10 Ethereum and has had HODL'D since then. He watched Ethereum climb to $1292 in May of 2018 (so his portfolio peak in 2018 was around $13000)
After this peak, his holdings dropped to $860 ($86 Per ETH), reducing his initial investment by approximately 72%.
Dave still held onto his convictions and believed in his crypto holding. He held strong through the bear market until the next bull cycle, where he said he would start to take profits at $10,000 as this was where many influencers told him his Ethereum would be heading. Sadly the influencers were wrong, and with his portfolio at an all-time high of $47000, he maintained his diamond-handed strategy and watched his portfolio dwindle back down.
Paperhanded Paul the Profit Takers Journey
Paul bought at the same time but took a different strategy. He decided to sell his bag of Eth when he made some good profits. He sold his whole bag of Ethereum for $9000 in January of 2018 ($900 per ETH); he missed the top and was ridiculed by his friends and others for being a profit taker.
Paul still believed in cryptocurrency and decided to reinvest in Ethereum when it was $100 as he felt it couldn't fall any further. He held strong through the rest of the bear market as he believed the bulls would return to the market again.
He was right, and in the next bull cycle, he sold his Eth bag again when the price was $4000 in March 2021
Paul was kicking himself for missing the next run-up in the market as his friends celebrated a new all-time high, and they all jetted off to the moon. He resisted FOMO and held onto his bag of stable currency, knowing a bear market would come at some stage in the future, and it certainly did; the market crumbled in May 2022
Paul missed the bottom of the bear market but decided to jump back into the market when Eth was at the $1500 mark in July 2022.
So Paul has his bag of Ethereum back, and he is waiting for the next Bull market where he will cash out again.
Where are they Now?
Dave still holds his 10 ETH, and his Bag dropped as low as $8900 in the 2022/2023 bear cycle. At the time of writing, his Eth bag is currently worth around $19000. This is a 6X gain on his initial investment; if he had sold near the top, he would have made a 15X ($45000), assuming he sold around the $4500 level
Paul now holds 240 Eth, having been a paper-handed investor and taking profits to reinvest them back into the market lows. His current Eth bag is worth $454000, and he is still ridiculed by the Diamond hands, who have been strong and held through 2 bear markets...
On this evidence, would you rather be able to gloat that you are a diamond-handed hardcore crypto investor... or a strategic profit taker who can build a portfolio on profits... I believe the answer is very clear!