Buying the Dip
During this time, BTC has dropped from around 93,000 to about 76,000. It's unclear how many people are stuck on the path of buying the dip, with various bottom-fishing and prophetic predictions flooding the crypto community. So let's talk about what buying the dip really means.
Buying the dip does not mean to buy continuously while the price is on a downward trend, averaging down, and ending up with a heavy position and significant losses.
The core of buying the dip lies in recognizing a market signal. More specifically, it involves identifying a market signal that suggests a price may be stabilizing after a decline.
It’s best not to predict where the price will stabilize; let the market tell you because the market is always right.
So, how do we determine if the price might stabilize?
From a technical perspective, the most straightforward understanding is that the price stops making new lows and rebounds past previous highs. Alternatively, after a prolonged and significant drop, the price may form a consolidation range or a converging triangle pattern at lower levels.
At this point, you may notice that buying the dip is not about finding a specific point but rather a range or a pattern.
You can also use moving averages to make judgments, for example, only entering a position when the price is above the 5-day or 10-day moving average.
The real ‘low’ is a divergence between price and value, not merely a technical support level. The essence of buying the dip is to capture market mispricing opportunities, not to blindly catch falling knives.
When selecting targets, try to choose leaders and avoid small and mid-cap projects. Additionally, during operations, it’s crucial to manage your position and risk, for instance, when building a spot position, you might consider buying some Put options with a strike price 30% below the current price (cost ≈ 5% of the principal).
In summary, buying the dip is not about “buying more as it falls,” but rather capturing market mispricing opportunities through a triple validation of technical analysis, on-chain data, and sentiment, all while keeping risk under control.
