What’s your biggest fear about investing in crypto?
Most people refrain from investing in crypto because they are afraid of its volatility. They fear that it might crash anytime, leaving them with nothing.
But here’s the thing.
Instead of fearing a crash, you should be eagerly waiting for a crypto winter, a counterintuitive approach that all great investors love, the “buy the dip” strategy.
If you’ve spent any time reading about investing on Twitter or Reddit, you’ve almost certainly heard the saying “buy the dip.”
Buying the dip refers to buying an asset, like a stock or cryptocurrency, after its price has declined from a recent high. Ideally, you’re getting a bargain, and if the price rebounds, you’ll make money.
When the market has been in a longer-term sustained uptrend, this dip in price presents an opportunity to buy more shares or coins at a discount. This way, if the market returns to new highs, you’ll have more shares or coins, which enhances your future gains.
Market experts suggest that it is a good time to buy digital tokens for domestic investors, but one should stick to quality and make long-term investments.
New investors should see it as a great opportunity to start accumulating in small lots, especially investing in well-established crypto because the chances of them increasing in value again are far higher.
Bitcoin is a great example of well-established crypto. It’s one of the most volatile assets in history and has survived some of the biggest crashes. The lowest dip of bitcoin happened in 2011 where its price dropped by over 99%. It was a miracle for investors to recover anything at all after that, but they did.
Despite all that, bitcoin has managed to weather the storm of fluctuations and maintained a persistent uptrend since its inception.
Despite falling back significantly from its latest all-time high price, many experts still expect Bitcoin’s price to rise above $100,000 at some point — describing it as a matter of when, not if.
Bitcoin’s price retraced near 30k – a big drop from the latest all-time high it hit in November, when it went over $68,000.
Even with the recent decline in price, Bitcoin is more than twice as valuable as it was when it started 2021 below $30,000. For cryptocurrencies, these kinds of ups and downs are nothing new.
Take a look at the history of Bitcoin for example.
- From January to February 2018, the price of Bitcoin fell 65 percent
- In November 2018, the price of Bitcoin fell below $4,000, representing an 80 percent decline from its peak the previous January.
- Bitcoin reached a low of around $3,100 in December 2018.
- By October 2020, Bitcoin was worth approximately $13,200.
- In November 2020, Bitcoin again surpassed its previous all-time high of over $19,000.
- After another surge on 3 January 2021 with $34,792.47, Bitcoin crashed by 17 percent the next day.
- Bitcoin traded above $40,000 for the first time on 8 January 2021 and reached $50,000 on 16 February 2021.
- On Wednesday, Oct. 20, 2021, Bitcoin reached a new all-time high of $66,974.
It usually comes down to track records. If crypto is still standing after numerous dramatic episodes like bitcoin, it’s likely to recover from a dip.
Summary: Follow The 5 Percent Rule
Keep your crypto investments under 5 percent of your overall net worth. If your crypto investments are below the 5 percent limit, you can buy on dips subject to available surplus.
Remember that this 5 percent is not a standard rule but is designed to keep your hard-earned money safe from a highly volatile asset class. You can always increase your allocation on the basis of your risk profile.
So, if you have been wanting to invest in crypto for some time and it was too expensive for you to get into it, this is your chance.
Take full advantage of this crypto winter so that in the coming spring, you will be a happy owner of a highly valuable crypto.
There are even better ways to manage your crypto investments – that do not necessarily follow the 5% rule – The Plan by Dan Hollings is a good starting point.