Things to Note When Buying the Dip
- Why Did Bitcoin Prices Fall?
- Should You Buy The Dip?
In the past few days, Bitcoin prices have been see-sawing around the $48,000 mark, after the bulls had pushed the price above the $60,000 mark. The fall in price has brought shock to the investors and has also created a dilemma, whether to buy the dip or not.
Why Did Bitcoin Prices Fall?
It is important to identify the reasons that led to this dip in prices of Bitcoin, before exploring whether this dip should be bought or not. The primary reason has to be the recent crackdown of China on the mining of cryptocurrency. China believes mining to be very harmful to the environment.
Secondly, Twitter CFO, Ned Segal, revealed that the organization currently had no plans to start investing in cryptocurrency.
Some experts have the opinion that the dip is because more and more people started to invest in Bitcoin by borrowing money, which may have led to this dip. The situation where buyers are buying with more money than they have is known as ‘leverage long’. As per the exchange funding rate metric, the prices go higher when investors open highly leveraged longs.
But, in the situation of a self-off, when the whales are trying to flush out people, the position of investors can go to zero, thus resulting in dumping of positions, causing a cascading effect and leading to further drop in the prices of Bitcoin. In this situation, the prices of Bitcoin are expected to rise once this is stopped.
Should You Buy The Dip?
The current dip is considered to be more of a correction phase than a slump. But nothing can be said for sure and in the future, things for Bitcoin can go either way. But the past has shown that Bitcoin investment has yielded high returns for investors who employ a long-term outlook when dealing with it.
Some of the reasons that are in favor of buying this dip are listed below:
The prices of cryptocurrency have fluctuated similarly to the stock prices. It is important to understand that not all market dips are a buying opportunity. In any opportunistic investment, there will always be risks and gains associated with it. There is no denying the fact that at present Bitcoin and the crypto market are undergoing a correction, but its prices are still high and in the past, we have witnessed how Bitcoin always rises after a price dip.
The current scenario is not the same as that of 2017 where prices rose three times and then dropped by shedding 3/4th of the value. At present many leading Fintech platforms are backing Bitcoin, many financial institutions around the world have started to accept Bitcoin, trading of cryptocurrency and Bitcoin has never been as mainstream as before, several new regulations are in pipeline, and many more.
The new Taproot upgrade has brought in new privacy features for investors, to provide them with some level of privacy and anonymity in their processes. The upgrade will also lower the transaction fees and will also offer features like employing smart contracts and many other blockchain functionalities.
This means that Bitcoin is here to stay and its prices will increase again. So it is completely the decision of an individual to buy right now or not.
Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investing.
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