Time and again you hear crypto enthusiasts and some analysts advising that you rush and buy a DIP when the crypto market is crashing. The simple reason for this advice is that the market will bounce back and you’ll be in profit. Sometimes, these analysts make it sound as if buying a DIP is RISK-FREE. Well news flash, it’s not.
In fact, buying the DIP when the prices of cryptocurrencies are crashing is as risky as buying when the price is climbing. Here is what these analysts are not telling you about buying the DIP.
What does buying the DIP means in cryptocurrency
Buying the DIP is a team used to encourage crypto users and enthusiasts to buy more cryptocurrencies when the price of cryptocurrency is falling. The reason why crypto experts and analysts advise users to buy the DIP is that the price will bounce back. Here is a typical example to drive home the point.
BTC was worth over $65,000 back on November 21, 2021, but six months later on April 13, 2022, BTC is now worth a little above $30,000. This is about a 53% fall in the price of BTC over a 6-month period. Buying BTC DIP will mean that while BTC was falling from $65,000, you should buy more BTC because the price will go back up to $65,000.
So, let’s assume you bought the DIP on March 18 of 2022 when BTC was around $41,000. Now, if the price goes back up to $65,000 you’ll be in profit and would have made a whopping $25,000 from holding 1 BTC. And this will make buying the DIP a good decision.
But, that is not always the case in fact using the same price chart of BTC above, one month later, the price of BTC fell to $30,400. This simply means that if you bought the DIP back on March 17, 2022, you’re now at a loss of $10,000.
Why it’s RISKY to buy the DIP
The main reason why it’s very RISKY to buy the DIP is that you don’t always know when the market will start to rebound. So, you might have bought the DIP when the market is still crashing and you’ll continue to be at loss.
So, when it’s the best time to buy a cryptocurrency. In simple terms, there is no perfect timing but the best time to buy a crypto asset is when the price starts to rebound. And to know when a market will start to rebound you need to make extensive market research on your crypto of choice and read its history charts.
Buying the DIP is not always RISK-FREE and always have in mind that the cryptocurrency market is VOLATILE. It can be BULLISH today and BEARISH tomorrow (vice a vice). Always remember, there are two sides to every coin. So, don’t fall for the BUY THE DIP sentiments, make your own research first.
Note: This is not financial advice. It’s a personal opinion explaining from a user’s point of view what buying a DIP in the crypto market means and why it’s not always good advice.