CRYPTOCURRENCY: BUY THE DIP…
Bitcoin has recovered dramatically in the last few hours after falling to a 24-hour low of $18,589, and this has had a ripple effect on the whole crypto market. Because of Bitcoin’s 10.33% gain in the last 24 hours, the bulk of the top 100 cryptocurrencies is currently trading in the positive direction. However, the question persists; When is the right time to buy the dip?
What does it mean to buy the dip?
Buying the dip entails purchasing an asset whose price has dropped dramatically, such as a stock or cryptocurrency. The concept is that you’re getting a good deal and will profit when, or if, the price rises again. Buying low and selling high is one of the oldest investment methods, and timing is crucial to success.
In the crypto space, investors frequently keep a close check on a particular coin to see whether its value dips and buy when it does. Others will begin investing modest amounts whenever the price falls below a certain level (say 25%) and will continue to do so each month until the price rises again.
Causes of the current crypto dip.
The drop in cryptocurrency values over the last months is widely attributed to several factors that are affecting not only crypto but a variety of global markets ranging from tech stocks to commodities.
The US Federal Reserve has raised interest rates in response to rising inflation, and these inflationary restrictions have a detrimental impact on cryptocurrencies such as Bitcoin. As borrowing costs rise, investors will shift their portfolios away from ‘riskier’ assets (crypto) and toward more conservative investments, resulting in the recent Bitcoin dip.
Other factors influencing the cryptocurrency dip include the Russia-Ukraine war and China’s ban on cryptocurrency trading and mining. It is estimated that more than 50% of the world’s bitcoin mining was done in China, and without this, it is unclear how global Bitcoin production (and thus its price) will be affected. Regardless, cryptocurrency ownership is increasing, and crypto enthusiasts believe that mass adoption is inevitable, leading to increased trust in cryptocurrencies. Despite its volatility, Bitcoin’s price has steadily risen over the years, and some predict it will reach $100,000 by the year’s end.
Is it time to buy the dip?
The crypto winter, intensified by the current market crash begs the predominant question, “is it time to buy the dip”. Judging by the seasonality of cryptocurrencies, wherein booms have historically been preceded by crashes, buying the present dip could generate compelling returns in the future.
However, there are some critical bits of information that you need to feed yourself and consider before buying the dip.
- The Crypto space is extremely volatile: The most obvious fact about cryptocurrency is that it is extremely volatile. Even investors in some of the most volatile high-growth tech stocks are in for a rude awakening when it comes to the gut-wrenching daily price movements in crypto. Despite its current decline, Bitcoin has produced an 800% return over the last five years. That outperforms the S&P 500’s 65 % return rate over the same period.
- Cryptocurrency future is uncertain: To begin, perhaps the most serious risk is the possibility of draconian government regulation. Countries that believe their power is under threat may explicitly forbid the ownership and mining of cryptocurrency, as China did last year. Aside from regulation, cryptocurrencies have an extremely broad range of outcomes. Bitcoin is gradually being recognized as a legitimate store of value and a viable alternative to owning gold. However, some, such as Block’s founder and CEO Jack Dorsey, see it as the internet’s native currency as well as a way to transact with others in a more digital future.
Crypto could completely change the game, completely disappear, or fall somewhere in the middle, nobody has definite knowledge of this. Bitcoin, which was launched in 2009, has the longest operating history of any cryptocurrency. Even so, its future is far from certain.
Every investor is unique. We all have different risk tolerances and thus use different investment strategies. Moreover, irrespective of your investment strategy, every choice you make should be based on comprehensive research. Investing in cryptocurrency requires proper risk management due to the high volatility and wide range of future outcomes related to its development and adoption.
Who bought the dip?
On May 9th, 2022, El-Salvador, the first-ever country in the world to accept bitcoin as legal tender bought the bitcoin dip. The Salvadoran president Nayib Bukele announced the purchase of 500 BTC worth $15.5 million when the price of bitcoin was $30,744.
Also, on June 19th, 2022, the balance of Binance’s cold wallet increased by around 101,266 bitcoins, indicating increased user deposits. This huge deposit was made during a period of high selling pressure, with the price of Bitcoin falling to its lowest value since late 2020.
Elon Musk is buying the crypto dip too!
Elon Musk, the CEO of Tesla (TSLA) — Get Tesla Inc. Report and one of the world’s most influential people, supported the crypto industry and, in particular, the meme coin Dogecoin on June 19.
Musk’s tweet caused a significant bounce in the market, which saw the post of the world’s richest man as a mark of renewed hope in cryptocurrencies, despite the fact that many projects and firms face uncertain futures.
According to data analysts, the price of Dogecoin, which was at $0.052307 a minute before Musk’s tweet, was now worth $0.058037, an increase of 8%. Other coin prices followed. Bitcoin, the most popular cryptocurrency, has regained some traction: the price was $19,510.07 at the time of the last check, up 4.7 % in the previous 24 hours. Bitcoin had fallen to $17,677.43 on June 18 before recovering slightly to $18,290.75 immediately after Musk’s tweet.
Beware of “buy the dip” & FOMO scammers
It will surprise you to learn that fraudsters capitalize on the current downward trend of cryptocurrencies to swindle prospective investors. There will be lots of commercials flying around “what coins are you guys buying this dip?” “Oh man, I wish it would dip even further so I could stack some more.” “Don’t forget to buy the dip hahaha”. DON’T FALL FOR IT
Also, be wary of so-called dip indicators that claim to predict the perfect time to buy the dip and use the FOMO (Fear Of Missing Out) STRATEGY to patronize you.
CONCLUSION
Conclusively, in my opinion, bitcoin remains the prevalent cryptocurrency in terms of market cap, and we know that there will only ever be 21 million Bitcoin in existence, which is an appealing factor in a world where inflation is a persistent issue. Bitcoin has previously experienced an 80% decline and recovered dramatically, so there’s no ground to think Bitcoin won’t rise from its lows again.
Additionally, the Bitcoin Lightning Network and services such as Cash App are making Bitcoin more accessible than ever before. Furthermore, while speculative, developments such as Web 5.0 offer the possibility of future upside. With Bitcoin trading at levels last seen in December of 2020 before it tripled from there, now is an appealing time for those who feel they missed Bitcoin’s last run or for investors looking to build on their positions.
BE WISE!!!
