The emergence of cryptocurrency in 2008 has brought several opportunities to the fore including cryptocurrency trading, staking, and yield farming. Just like the traditional trading concept, crypto trading entails the buying of a certain digital asset at a certain price and selling it at a certain higher price to realize gains.
The buying and selling of different cryptocurrencies on exchanges for profit-making is undoubtedly one of the most popular opportunities in the new financial technology industry that a greater percentage of crypto enthusiasts have embraced.
While cryptocurrency trading is a lucrative endeavor, there are also a lot of risks associated with it, and many assembled guiding concepts and principles. Among these postulations are fallacies and myths that some inexperienced investors have decided to run along with. This article seeks to clear the air regarding one popular misconception about the trading of digital assets.
Whatever Goes Down Will Always Rise Again
The popular maxim that 'after a dump comes a pump' isn't true in all cases. Unfortunately, many people have been made to believe that whatever asset plummets in price value will always find a way to rebound or even get to hit new highs in the future. This belief has trapped many inexperienced crypto investors, causing them to buy into failed coins/ tokens, possessing very little probability to rise again.
It is worth noting that the inverse of the law of gravity doesn't always play out with every cryptocurrency asset. While it is true that every crypto asset that pumps will eventually dump, it is not a certainty that every digital token that has been dumped will get to pump over time. Meanwhile, some digital assets that happen to plummet, touching their all-time lows (ATL), or experiencing a large percentage price decline could always rebound.
However, this can only happen if such a crypto asset possesses unique use cases or utilities and also has a solid community as an added advantage. In essence, some dumped crypto coins/ tokens may never get to be revitalized. Therefore, investing in these types of assets because they are affordable or cheap would always turn out to be a wild goose chase.
An investor needs to know what gives crypto assets their value. There are those things to watch out for in crypto projects which serve as the catalyst to price appreciation. The key thing is always use case; any project that has no clear-cut utility may not last in the crypto market. Hype could make them popular but their adoption may not be sustainable.
Thus, it is incumbent on an investor to invest in projects with clear use cases, good tokenomics, a solid community, and an explicit roadmap, among others. Therefore, not all tokens are worth buying when they dip. Yes, it is often said to 'buy the dip', especially in bear markets but it is important to only accumulate tokens with the potential to grow.
On a final note, many tokens have gone down in price with no sign of rising again. Equally, many coins/ tokens existing in the crypto market today would suffer extinction because they lack strong use cases. Therefore, carrying out due diligence before investing in crypto remains key.