The more Bitcoin (BTC) continues to shock and amaze people with its extreme volatility, the more attention it gets as an investment opportunity. However, it also raises a lot of questions. For aspiring investors, it raises a big one: when is the best time to enter the market?
What Does It Mean to “Buy the Dip” in Bitcoin?
A typical investor will say “buy the dip,” but what does that even mean?
Buying the dip
“Dips” refer to the many instances in the cryptocurrency space where a certain coin’s price falls after a recent uptrend. So when investors “buy the dip,” they wait for the price of an asset to decline and use it as a window of opportunity to enter the market. By entering the market during a “dip” in price, they’re getting their asset—in this case, Bitcoin—at a much lower cost, hoping for it to rise again in the future.
In essence, buying the dip is a common trading strategy that gives investors the opportunity to buy low and sell high—which, with BTC’s volatility, is an interesting investment opportunity. However, that doesn’t mean it’s a perfect trading strategy.
The biggest problem with using this strategy is that it may be hard for anyone to determine how far the price is going to fall. If you buy an asset at a certain price, who’s to say that it’s going to stop falling as soon as you buy? It may be difficult to distinguish the difference between a temporary drop in price and a red-alert signal that prices are about to fall much further.
Reducing the FOMO
When you use a trading strategy like this, you’re likely going to be susceptible to FOMO (fear of missing out).
FOMO has the power to lure many victims into dicey financial decisions and you’ll be surprised to hear that it’s a common feeling among investors. To ensure that you don’t lose any money because of it, your decisions have to be smart and sharp. And to do that, you need to do your research before making any form of investment.
Knowing what this crypto slang means is important because investors must understand that missing out doesn’t have to be such a big deal—there will always be another opportunity. If you end up dwelling on the FOMO, it may cause you more harm than good. These are the types of things that cloud your judgment and will lead you to a decision that you’ll eventually regret. If you do enough research, FOMO won’t have as tight a hold on you.
Another thing that you can do to reduce FOMO is to set goals before putting any money in. Ask yourself: why do I want to get into Bitcoin? Your answer to that question will give you a clear path to starting in Bitcoin.
If you’re looking to get into it to make some money, then buying the dip can be a good starter strategy for you. Of course, there are other strategies that you can look into (such as HODLing or day trading), so don’t limit yourself to this one. Do your homework, look at each strategy carefully, and pick one that works for you.
On the other hand, if you’re using it for a BTC real-use case—let’s say, buying a good or service—it doesn’t really matter when you enter the space since the price will be irrelevant. With enough research, you could learn how to buy Bitcoin easily, use it to buy a good or service on a reputable peer-to-peer marketplace, and then be on your way. Some of these platforms will even give you a free Bitcoin wallet after registering for an account.
Research is your friend
Although buying the dip may be a great starter trading strategy for investors, that doesn’t mean that it’s necessarily the best for you. This is what makes research so important. To be able to maximize your profits in this space, you’ll need to figure out what trading style suits you best, which platform to buy your crypto from, what type of wallet you’ll be needing, and more.
This entails a lot of homework but trust us, everything will be worth it in the end. By building a solid foundation of knowledge, you’ll be able to minimize risks and maximize profits—and that’s what we’re all after, right?
*The content is for informational purposes only. You should not construe any such information as legal, tax, investment, financial, or other advice.
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