Should You Buy The Crypto Dip (2024)
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If you head toward the different news outlets or social media, you will find that the talk of the town is all about crypto and its current dip. And if you simply read the headlines, they would make you believe crypto is dead.
Bitcoin’s price has plunged more than 70% from its all-time high, with the crypto leader seeing a price fall of more than 70%, as Bitcoin falls from over $68,000 per BTC to as low as $20,000. With several crypto lending platforms failing, crypto venture capital firms going bankrupt, over $1 trillion in market capitalization lost from the cryptocurrency market, and increased federal government scrutiny, maybe the headlines are correct, or maybe they are just trying to clickbait you.
But as any good trader knows, you should never make decisions based on headlines alone. Instead, you need to do your research, which is exactly what we will do in this article. We will try to cover market conditions, cryptocurrency dips, reasons to buy and not to buy the crypto dip, and more. So, let’s get started.
What is a Crypto Dip
A dip is defined as a temporary and slight decline in the price of an asset. When it comes to cryptocurrency, a dip usually refers to a sudden drop in crypto prices after a period of stability or an extended bull run.
Dips are usually identified as a short-term market correction and are not considered signs of a more significant trend reversal. In addition, dips are visually identified as a ‘valley’ on the price chart.
While some investors may see a dip as an opportunity to buy assets at a lower price, others may adopt a wait-and-see approach, waiting for the market to correct itself before making any decisions. Investors new to cryptocurrency may be particularly susceptible to FUD (fear, uncertainty, and doubt) during a dip and may make rash decisions that they may regret later.
3 Reasons to Buy the Crypto Dip
Is it time to “buy the dip” now that Bitcoin is down over 50% from its all-time-high price, and several top-tier cryptocurrencies are down even further? Here are a few reasons to consider investing in cryptocurrency while the prices are low:
#1. All Cryptocurrencies are on Sale
Long-term investment goals are to buy low and sell high, so when prices are down across the board like they are now, it’s an ideal time to invest in crypto. If you believe your favorite crypto coin will surpass its all-time high price in the future, buying while prices are down will maximize your return on investment (ROI).
Bitcoin has dropped almost 70%, while the other cryptocurrencies have dropped to 80% or even higher. So, buying the dip would be a good investment strategy if you plan to invest in cryptocurrency long-term, as it feels like buying cryptos at a 70 to 80% discount.
If you were buying when the prices were high, it makes sense to buy more when everything is much cheaper. This will reduce the average price you bought a cryptocurrency asset over time and increase your profits.
#2. Crypto Market Cycles
Cryptocurrency has been around for less than a decade, but there is already a well-established market cycle based on the “Bitcoin Halving,” which happens every four years. The halving reduces Bitcoin mining rewards to half, making it twice as hard to mine new Bitcoins and lowering the overall Bitcoin supply growth.
When the Bitcoin price falls, it frequently appears ahead of a large climb in price, with previous cycles witnessing Bitcoin rise by 10,000 percent from the bottom to the top. And when the Bitcoin price rises, so do the general cryptocurrency market value; at times, even more so.
According to the four-year market cycle theory, 2023 is when a crypto bear market (known as “crypto winter”) will begin, lasting until the next Bitcoin halving in early 2024. During a market decline, prices stay low, and buying Bitcoin and other cryptocurrencies you believe will endure through the following cycle may be an excellent opportunity.
#3. Institutional Adaptation
Multiple Fortune 500 companies have invested in cryptocurrencies like BTC, ETH, and XRP from 2020 to 2023. From PayPal allowing customers to buy, sell, and hold cryptocurrencies to Square’s Cash App investing $50 million or 1% of its total assets in Bitcoin, mainstream companies are turning to cryptocurrency.
This institutional adoption will help drive cryptocurrency prices higher over time and increase the crypto market cap to $2 trillion from $300 billion. However, now it is back to $1 trillion, but that doesn’t mean you shouldn’t buy the dip.
Although some crypto investors may claim that big investor interest conflicts with Bitcoin’s goal of decentralization, it does no doubt enhance the legitimacy of crypto as an asset class. And with the entrance of institutional investors comes increased media attention and wider adoption from people who would never have considered investing in cryptocurrency before.
If you’re still not convinced, remember that even the world’s greatest investors like Warren Buffett and George Soros have made some of their best crypto investments during a market downturn.
Verdict: The more institutions acquire crypto, the more valuable it becomes as long-term cryptocurrency investments. When most businesses did not own any cryptocurrencies several years ago, purchasing the present price drop was a more significant investment than it is today.
3 Reasons NOT to Buy the Crypto Dip
Although cryptocurrency has exploded in popularity over the last decade, it may not be the greatest investment option for everyone. It may not be a good investment at all. Here are several reasons why you shouldn’t invest in the cryptocurrencies dip:
#1. You can’t handle the Crypto Rollercoaster
If you are not a fan of cryptocurrency investing volatility, you may want to avoid buying the dip. The prices of crypto assets are well known for their volatility, and prices can change rapidly, sometimes going up by 10x in a month or down by 90% in a single day.
If you are not ready for the rollercoaster ride and can’t stomach the thought of seeing your investment fall by 90%, you should avoid buying the dip. Even if the crypto market has dropped over 60% from its all-time high, it may fall another 60%. Do you have the fortitude to HODL?
Well, you should never put your money that you can’t afford to lose. It can be a nerve-wracking experience to watch your money evaporate in a matter of seconds. So, if you are not ready for the volatile swings of cryptocurrency investing, then you should avoid buying the dip.
#2. You don’t have an Emergency Fund
BTC or any other cryptocurrency doesn’t count as an emergency fund. So if you’re thinking of dumping all of your extra cash into crypto while the prices are low, but you don’t have enough money to cover a $1,000 emergency—as is the case with many Americans—you should not invest in the cryptocurrency dip.
Before you invest in cryptocurrency, you should have an emergency fund that can cover your living expenses for at least three to six months. It must be in your liquid saving account so you can access it quickly if needed. Your brokerage account, crypto wallet, certificates of deposits, 401k, and other investments are not emergency funds.
Emergency funds are intended to be used in a severe financial problem, such as a car transmission break or a water heater leak. So before putting all your money into these crypto dips, make sure you have enough money in a savings account to cover several months’ expenses. Then, you won’t have to sell your cryptocurrency at a loss if you need to fix your car or replace your water heater.
#3. You have no other investments
We understand that crypto is a technology that is changing the world at a rapid pace and revolutionizing traditional investments, but it is still a new asset class. However, because it is speculative and going “all in” on a single asset class is not a good investment strategy, it may be difficult for investors to perceive the value of cryptocurrencies.
To build an investment portfolio, diversification is the key. When you have other investments, such as stocks, bonds, and real estate, you can afford to take more risks with a small portion of your portfolio. Taking advantage of tax benefits available with 401(k) and Roth IRA accounts is a great place to start, as investors are rewarded with tax savings. In addition, investing in several asset classes like stocks, bonds, and real estate can help you build a more balanced portfolio that outperforms the market.
So, you should rethink buying the dip if you don’t have the long-term investment horizon or the stomach for the risk needed to invest in cryptocurrency. Setting objectives, determining risk tolerance, and investing with a long-term perspective are all essential elements of a successful investing strategy.
Should you Buy the Crypto Dip
The short-term investment in crypto can be worth its potential long-term awards only if you invest with money you can afford to lose. But before you invest, ask yourself a few questions: Do you have cash for an emergency? Can you afford to lose 90% of your investment? Do you believe in the long-term viability of your favorite cryptocurrency?
If the answer is yes to all the above questions, you can afford to take the risk and buy on the dip. If not, it’s better to stay on the sidelines and avoid buying the dip. No one knows where the bottom is, but if you’re okay with the risks, buying the dip can provide a high ROI in the upcoming years.
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Conclusion: Crypto Dip
As a new investor or crypto trader, the excitement of buying the dip may be hard to resist. Being an innovative and brand new asset, you can easily get overwhelmed. However, remember that crypto is still a speculative investment that can easily destroy your portfolio if you’re not careful.
Yes, cryptocurrency is currently 70 to 80% off, so investors who buy the dip may have significant long-term gains. However, the market may still fall further. Buying crypto regularly and having a long-term perspective can help you dollar-cost average into the market and take advantage of dips.
So, only invest what you can afford to lose, build an emergency fund, and don’t forget to diversify your portfolio.
Crypto Dip FAQs
What is causing the dip in crypto?
There is no one answer to this question as the dip could be caused by various factors, including generally bearish market sentiment, regulatory uncertainty, excitement about low-quality coins, negative remarks from Elon Musk, etc. The mix of these factors can potentially cause a huge dip in crypto.
How much is a dip in crypto?
The size of the dip will depend on how much money you have invested in crypto. A small dip might not be a big deal if you have a small amount of money invested. However, a small dip could become a big loss if you invest a large amount of money.
