⚠️ Hidden risks of 'Buying the Dip' in cryptocurrency
You've probably heard advice like: 'Buy the dip!' or 'Just use DCA (dollar-cost averaging)!' These approaches can work, but it's important to understand the associated risks.
📉 Why recovering losses is harder than it seems
When the price of an asset drops, a disproportionately larger increase is needed to return to the previous level:
A 10% loss requires a +11% gain to recover.
A 50% loss requires a +100% gain.
A 90% loss requires a staggering +900% gain.
If your asset has dropped by 90%, it needs to grow 10 times to get back to its original price.
🧠 The psychological trap of recovery
When an asset has almost returned to its previous price after a drop, there’s a temptation to 'wait for real profits.' But remember: your breakeven point may be someone else's profit-taking zone.
🔍 Not every dip is a buying opportunity
Yes, sometimes dips can be good opportunities. But not always. Some assets never return to their previous highs due to weak fundamentals — for example, tokens like 1INCH or ICP.
✅ What to consider
Use DCA wisely: It is suitable for strong assets with long-term potential.
Assess the trend: Don't buy into a declining trend.
Analyze the fundamentals: A low price doesn't always mean a good deal.
Manage risks: Don't invest blindly — conduct your own analysis.
Ask yourself: Is this a temporary downturn or a sign of deeper issues?
🧭 Strategies like DCA and 'buying the dip' can be profitable, but they require a thoughtful approach. Always invest consciously, relying on facts and analysis, not emotions.