Buying the dip: Few points to consider.

Buying the dip: Few points to consider.

By Dzoelx | Scripts | 24 Jul 2020


Buying a coin that has already made a tangible gain is always a scare for cryptocurrency investors. No one wish to buy at the top, done that a couple of times myself and was full of regrets…as usual. ‘The greens are amazing’, but that is only true if you are already a holder; otherwise, the reverse is the case.

For intending investors, the dip time is usually the best time to buy. Maybe the coin is just pulling the strings and you know…as the saying goes, ‘it always shines after the dark’. So, if it’s dip time, then it is buy time…but that’s not always the case.

The normal idea is always to buy the dip and hope it doesn’t dip further from your purchase price. Moves like this have come out good sometimes, however many of the times, the current dip point is just a tip of the iceberg as more dip comes after the initial dip and leaves those who bought the initial dip at loss. Ready to buy the dip? Maybe you should give it some little thought and a invest some time in making a few researches.
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Making the right decision in cryptocurrency investments is always a puzzle. source

 

Why the dip?

 

Fluctuation of cryptocurrency prices is a common and normal event; this is in congruence with the market dynamics. Basically, nothing stays green forever, after some good gains comes some price corrections and pull backs. Hence, it is normal for crypto prices to jump between gains and losses at intervals.

However, sometimes, this price drops exceeds normal pullback ranges and doesn’t occur due to normal market dynamics but due to certain other market forces including project updates, team activities or FUDs. Investors are always in look out for dips of this sort as the price tends to dip so much, pulling up to 70% price drops. ‘Dips of this sort brings the biggest gains’, but wait! Why the dip? Why has the price dropped this much?

It is very important to study the events which resulted to this sudden slash in price. Getting greedy when others are fearful is unarguably a good move, but sometimes this could also backfire, in reality, this move is always risky. Taking time to make certain considerations before ‘getting greedy’ increases your chances of averting some disasters. Price may dip badly in cases of irregular acts by the team behind the project you are invested in, this always drive the price nuts and could possibly dip to its least point, I mean, the team is gone!

In certain other cases; Fear, uncertainty and doubt (FUD) assertions could lead to grave effects on the value of a projects, while these FUDs are untrue most times; they always have negative effects on their victim project. In this case, verifying the validity of these statements may be of benefit in your decision-making process, if the ‘FUDs’ are valid, then certainly are not FUDs but facts which should be considered seriously.

 

What are the chances of pulling a recovery?

 

Regardless of what caused the dip in price, there always exists a chance for a recovery, especially in the crypto space…impossibility is just a word thrown around for no reason. No matter how bad a project dipped, it could turn its fortunes around if the right moves are made. But what are the chances of the right moves being made and what are the possibilities of the market reacting as expected towards these moves.

Pulling a recovery depends on two factors; the project making the right moves and the market reacting positively to its moves, a recovery cannot happen without these two factors being met…satisfactorily. Here, taking a good at the team behind the project and their reaction towards the dip is surely an important move to make. How it the team reacting to the drop in value of their project and how do they hope to get out of the ditch. In a situation where the team already ‘exit scammed’ then this is not possible, a recovery is almost impossible, however, as I already stated, ‘impossibility’ is an illusion in the crypto space. But if a project team is gone for real, then a recovery is far-fetched.

On the other hand, chances of the market reacting positively to the moves made by the team depends on the effect of the dip on the reputation of the project. It is always very hard to regain a lost trust. It is justifiable for an investor to abandon a project after a huge price drop, it is hard to earn trust in the first place, but it is even harder to get it back after losing it. This is the case in situations like this, the market usually gets cold towards a project that got them ‘rekt’ in the past.

Regaining the attention and love of the market requires constant masterpiece from the project, but this cannot happen without a solid team, or the team getting solid after the drop. Considering the chances of the team going through this journey before buying the dip could really prove resourceful to you as an investor.

 

Possible extent of recovery

 

Alright, from your researches, the project looks set for a comeback, but to which extent. How far can they go from there current position? Certainly, if a project is determined to keep working harder after a huge price drop, it is poised to pullback some losses, but sometimes the pullback is no relative to the drop. For a project which experienced a 70% price drop, making a 70% gain from their current position still keeps them below their former top level. This is an indication of the extent a project needs to go before a complete recovery. It is always hard at the bottom.
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Source

If the projects’ projected recovery level exceeds your buying point, then buying the dip could be a profitable decision, otherwise, you might be on your way to being a ‘bag holder’…for a long time.

At the end of it all, making decisions in cryptocurrency trading have always been a tough hill to climb. ‘luck still rules’ and impossibility is a mere illusion. Researches and ‘informed decision’ only improve your chances of making the right moves, but does not guarantee a positive outcome. But always do your own research.


Dzoelx
Dzoelx

Programmer|blogger|freelance writer | twitter: https://medium.com/@joelagbo


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