This week, the crypto market started experiencing some downturns mirroring the events of last year. Bitcoin which started the week trading at $35,502.94 is currently trading at $27, 968.80, as of the time of drafting this article, and for the first time in about 16 months. It is pertinent to know that all the gains recorded in 2021 have been erased making investors flee out of panic.
So-called stablecoins which are pegged to a commodity or currency such as the US dollar and are designed to have a relatively stable price have also started to decline this week, taking the fears of investors up by a notch. As of this morning, UST (a stablecoin) was trading at about 62 cents, well below its intended $1 peg. UST is an “algorithmic” stablecoin that’s underpinned by code rather than cash held in a reserve.
With all that has been going on this week, there’s a group of investors that think that this is only an opportunity that should be seized with both hands. El Salvador, the first country in the world to adopt Bitcoin as a legal tender, took advantage of the dip and added 500 Bitcoin to its reserves on Monday. The country’s latest addition was worth $15.5 million as of the time of purchase. Since El Salvador adopted Bitcoin as a legal tender, the country has been doing almost everything to increase its pile including buying the dip. The Central American country’s president tweeted last year September after purchasing 150 Bitcoin that “They can never beat you if you buy the dips.”
El Salvador’s latest addition of 500 Bitcoin is the country’s largest purchase of the cryptocurrency since adopting it as a legal tender and adding it to its balance sheet.
While the majority of investors are frightened and are panic-selling in a bid to save themselves more losses, some investors think that this is a good time to buy cryptocurrencies. This leaves us with the question “To buy or to not buy the dip?”
Before making your decision on whether to buy or not buy the dip, you need to understand what buying the dip means. The belief behind buying the dip is that the decline in the price of cryptocurrencies is temporary and that it is an opportunity to buy cryptocurrencies at a far lesser price to maximize gains.
In other words, the idea behind buying the dip is to own more of such cryptocurrency and acquire them at the minimal price possible.
The expectation is that these cryptocurrencies will bounce back after some time, enabling investors to make more profit on their investment or purchase.
REASONS TO BUY THE DIP
For those who had always wanted to invest in cryptocurrencies but were unable to do so because of high prices or were only able to acquire a lesser amount of coins than initially planned, the dip is a perfect opportunity to tap into. Buying the dip means acquiring more cryptocurrencies for less and increased gains when they soar again.
The dip is a “rare” opportunity to enter a crypto network. Let’s take a look at Bitcoin. The coin once sold for as low as one can imagine. But today, it has recorded highs upon highs and has an all-time high of $69,000. Trading currently below $30,000, a dip such as this is an opportunity to get on the network for people who missed out on the opportunity to acquire Bitcoin when it was trading at lesser prices. The dip, therefore, is another opportunity to get on a crypto network that has been certified to be viable and is in wide use.
For established cryptocurrencies such as Bitcoin, experts advise people to buy the dip because they have shown the ability to rise above extreme fluctuations, market instability, etc. – basically a track record. Last year, Bitcoin suffered extreme fluctuations losing more than half of its value but still managed to bounce back even though it is still yet to reach and surpass its all-time high.
In conclusion, the idea behind buying the dip is to recognize the opportunity therein. Dips do not happen all the time but when they do, especially with well-established cryptocurrencies, it is advisable to take such an opportunity. But the importance of making research and seeking advice from experts, should not be ruled out.
Having examined the reasons to buy the dip, let’s take a look at why you shouldn’t buy the dip.
REASONS TO NOT BUY THE DIP
One question to ask yourself when buying the dip is what if the dip continues? What if it continues and eventually crashes? While it is most unlikely that well-established coins like Bitcoin may crash, one thing that’s for sure is the possibility to continue losing money.
Apart from the huge possibility of losing money, let’s look at some of the predictions for Bitcoin this year from experts.
Earlier this year, some experts opined that Bitcoin would experience a sharp decline this year. They forecasted 2022 to be another roller-coaster type of year for Bitcoin, and cryptocurrencies in general. A prediction by Carol Alexander, a professor of finance at the University of Sussex, said Bitcoin would tumble as low as $10,000 and wipe out the gains recorded in the past. A bit extreme if you ask us but everyone has seen how volatile Bitcoin can be in the past, so her prediction cannot be exactly ruled out. Although Bitcoin is still quite far from falling to $10,000, it has erased the gains recorded in 2021. It may, therefore, make sense to maybe listen to what this professor of finance is saying…
“If I were an investor now I would think about coming out of Bitcoin soon because its price will probably crash next year”, the University of Sussex professor said. Her prediction stands on the basis that Bitcoin has no value and has no backing. This completely reminds us of what Donald Trump said last year, that Bitcoin is a scam as it is based on thin air.
As an investor, whatever decision you plan to make should be embarked on based on deep research and consultation with experts in the crypto space.