In the week ending 22 May, 2021, the world witnessed a crypto crash of a high magnitude. For instance, the bitcoin fell from $65 000 to $30 000. The prices of other cryptocurrencies fell by around 20%.
However, within a week the price of the bitcoin bounced back to $40 000. These price movements help traders to appreciate the buy dip strategy. The main logic for the buy dip strategy is that when the price of an asset such as cryptocurrency or stock goes down, it will one day rise again.
Therefore, it makes economic sense for traders to buy low and sell high. What exactly does the buy dip strategy involve? The strategy involves buying a cryptocurrency when there is a sudden dip in its price.
Specific buy dip strategies
The buy dip strategy is most beneficial during a bull or stagnant market. The first specific strategy in buying dip is to buy incrementally as the price decreases. This means you buy at different price levels when there is a downtrend.
The second strategy is to wait until the price settles. Alternatively, you can wait until the price shows a recovery, then buy the coin.
Thirdly, a trader can set buy orders at lower prices and let them fill. Thus, one sets the “buys” before the historic support levels or psychological levels. With these, one can buy the “big dips” or buy below the average or at the recovery point.
There are different ways to profit from this. Someone can sell the cryptocurrency as soon as the price rises to a reasonable level. Alternatively, the trader can get the gains incrementally or HODL.
However, the dips differ from one another. For instance, within a week we can come across many small dips. Then from time to time, we get big dips. Incidentally, during a crypto crash we get some biggest dips. And people can benefit from buying during such periods.
Using buy dip and HODl strategies
Other traders buy the dips and HODl. Holding or HODling involves buying a cryptocurrency and storing it for long period before selling it. Usually, holding a specific coin is a low risk investment, by standards.
Which cryptocurrency can one hold?
Normally, it is best to hold the top cryptocurrencies by MarketCap. Thus, most people prefer to buy the cryptocurrencies which are in the top 10.
Examples of the top cryptocurrencies, one can purchase and hold
Bitcoin: This is the top cryptocurrency at the moment with a current market cap of over $700 billion
Ether: Ether is at the second spot, with a market cap of over $300 billion.
Tether (USDT): Recently, Tether occupied the third position with a market cap of over $60 billion.
Binance: This coin is on the fourth position with a market cap of over $50 billion.
Cardano (ADA) sits on the fifth position, with a market cap of over $49 billion.
I am Mashell Chapeyama, a crypto writer, analyst, and researcher. My burning interest for cryptocurrencies and the blockchain makes me willing to share the knowledge I have gathered over the past 10 years with crypto enthusiasts around the world.
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