- The entire cryptocurrency market suffered a significant crash on September 3rd.
- BTC, XRP, ETH are all down from their 2020-highs and are currently trying to recover.
Cryptocurrency users are known for their love of the word ‘HODL’ and ‘buy the dip.’ This is especially true when the market plummets, and everyone is panicking. The term HODL is a term derived from misspelling hold, and it originated on Bitcointalk from a post telling people to continue holding Bitcoin despite the crash.
Buying the dip is another trendy term and strategy applied by many cryptocurrency investors. At first, it might sound relatively easy to buy the dip; however, if we dig deep down, we can quickly realize that it’s not as simple as some people say it is.
Strategies to safely buy the dip
The crypto market is extremely volatile; it’s not weird to see 5-10% moves during the day. If an investor simply buys all the dips, he/she would make no money. There are important considerations that need to be taking into account before actually buying the dip.
The most important thing to consider is: will the market actually recover after this crash, or is this the beginning of a long-term downtrend? If an investor believes the market will eventually recover, the dollar-cost averaging strategy would be ideal.
Let’s take Bitcoin as an example. BTC is currently trading at $10,100 after dropping from $12,000. This is considered a dip, but should you buy already? It’s essential to look at longer time-frames here like the daily or weekly charts.
On the daily chart, we can see the 25-MA acting as a support level right now. This could be the first level to start buying the dip. Then we have the 200-EMA at $9,667, which would be the next point to buy. The lowest level is $9,080 from the 200-MA, but here we could use $9,000 as it is a strong psychological level.
It’s also important to note that the daily RSI is close to the oversold zone, which would be around $9,800 right now. Historically, an RSI below 30 was almost always followed by a strong rebound.