When the Bitcoin price drops for no apparent reason, a new buying opportunity is created. As is the case with any financial market, buying the dip can make the difference between losses and profits. It is a creed to live by if one is serious about making money through investing.
Always buy the dip for Bitcoin
There are few markets where buying the dip can prove to be an efficient investment strategy. Bitcoin is one such market. Its price swings can be volatile, creating a lot of money-making opportunities in the process. Taking advantage of these opportunities is crucial. Not only will it help increase the profit potential, but it’s also an effect dollar-cost averaging strategy.
For those unfamiliar with the concept, buying the dip is very easy. In the case of Bitcoin, it is a matter of waiting for the price to drop. Unlike other assets, Bitcoin’s value can fluctuate by hundreds of dollars all of a sudden. This leaves a lot of room for profit to those who take advantage of it. Dips are natural in any market, as no stability can be found anywhere.
What makes Bitcoin exceptional is how its value can recover equally quickly. More specifically, a current $300 deficit can be recovered in a matter of minutes, or hours. It is by far the most resilient market today, although it can go through extensive periods of bearish momentum as well. When it turns bullish, however, there is nothing capable of stopping Bitcoin in its tracks.
In short,, buying the dip as a Bitcoin investor or speculator is crucial. Even if the market doesn’t recover right away, one can still bring down the overall investment cost of one’s portfolio. This is a crucial aspect to maintain a healthy and balanced investment portfolio. Lowering the average cost of entry will often pay dividends further down the road.
Profits are Never Guaranteed
While the appeal of buying the dip cannot be ignored, it is never a foolproof technology either. Financial markets are, by default, unpredictable. Certain patterns will repeat themselves from time to time. However, the duration between repeating patterns can vary greatly.
In Bitcoin’s example, the price has gone through bearish momentum between early 2018 and early 2020. This entire timeline has been one big dip, allowing new entrants to set up a strong portfolio. The majority of people purchasing Bitcoin since that time are currently either in profit, or at least at their break-even point. Assuming they kept buying the dip along the way, their current point of entry is likely very low, resulting in bigger profit.
That being said, there is never a guarantee for profit. It is often better to buy Bitcoin during or after a big market dip compared to during a bulltrend. Chasing the top is akin to catching a falling knife. It will literally cut a hole in one’s portfolio that can take years, if not decades, to be restored.
There is a way to buy the dip during an uptrend, however. Bitcoin’s price tends to rise, then retrace, before moving up again. Timing those drawbacks and making key investments in sync with that momentum is often a solid approach.
It is crucial to watch out for lower lows when exploring this option, however. Bitcoin is, and will always be, volatile and unforgiving.
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