Despite all these, we still find lots of persons who are still holding on to there crypto assets; and this is no surprise as the first lesson you will learn in cryptocurrency is the value of patience. There are some others who see this drop in price as an advantage, thus they consider it as an opportunity to buy the deep, so that they can have more coins in their portfolio at a very low cost. Although this sound logical, we have had experiences of those who have made that move, and the outcome wasn't favorable, as some of the altcoins they bought never found grounds to appreciate even when the price of Bitcoin and other altcoin rose.
In this article, I will be sharing with us, some of the things we should consider before we buy a dip.
1. Get proper understanding of the market:
When investing in general, it is important to first study the market you want to invest in. The same is true to cryptocurrency investment. A person who wants to invest in any crypto currency must understand how volatile the crypto market is, and how hard it is to predict the market direction. But there are some things you can check out, as they will serve as an indicator to know if a coin is promising or if it isn't.
For instance, if a crypto project or coin you want to invest in as a result of a dip is one which promising a very high return of investment (ROI), then you must tread carefully, as it's often times too good to be true. Just imagine when the founder of a crypto project promises it's investors of a 1000x ROI, it's a red flag, as we know a single person cannot, by him/herself completely turn the crypto market to his favor.
This is the problem most persons who buy shitcoins that never see the light of the day. I have fallen victim of one of such, and it was completely born out of greed. There were other red flags, such as; the coin founder himself has formerly been a part of a failed coin project, and yet again he began to float another coin project. Had it been I did a better market research, I would have easily picked it up with common sense.
2. Don't borrow to Buy a Dip, or use an emergency fund for it:
Yes, I know that sometimes, a dip can provide a market advantage, but it's so risky to buy a dip using a borrowed money. The reason is that you can't actually tell what the direction of the market will be tomorrow as the cryptocurrency market is too volatile. If you feel the pressure to buy a deep, (you might even convince yourself by saying that Fortune favors the bold), then you should ask yourself, what you will do if the market goes against you? How will you payback what you borrowed? That's is even putting yourself in a more bigger problem.
In addition, if the money you have at hand it's all that you have, it's advisable not to spend it on a dip. Make sure that even if you finally intend on buying a dip, it is a spare money you are willing to lose, in case the market doesn't turn out favorably for you.
3. Invest in coins that have a solid project or use case:
Not every coin can survive a dip. For some coin projects, a dip marks the end of the coin. This is often seen in coin projects that do not have a use-case. After the dip has lasted for so long, when finally the time comes for the market to reverse in an uptrend direction, we discover that the investors have already abandoned the project.
Therefore when you want to invest on an altcoin during a dip, research and know more about the coin, it's use-case, founders of the project, the team, etc. Make sure you don't buy a coin due to the fact that a group of person is hyping it. Sometimes the hype might have been coordinated by a group of powerful people who want to rip on others.
Unfortunately, it is so easy to create an altcoin these days, and there are lots of scam projects that look so real. Before investing, make sure you go through the roadmap of the coin as well as the white paper. Yes, definitely white paper is boring to read, but it is best too endure the stress, than to lose your money and be sorry.
4. Timing:
Timing is very crucial in a crypto investment. If you have finally decided to buy a dip, after validating the coin and it's project, then you must pay attention to the timing of the market. If you buy the dip, when the downtrend is half way or not up to half way over, then your timing have just made your investment unprofitable. For instance, assuming the price of BTC is $41,000 and you see the dip at $38,000. If you buy at that price, and the market goes further to depreciate, up to $31,000, you will be on a serious loss till the value of the market comes up to and above the $38,000. This is why a good understanding of technical analysis is very important during crypto investment. It will help you know when to buy a dip, how long you should hodl, and when it's best to sell your crypto asset.