Bitcoin is going down, and this could prompt many traders to take advantage of the motto “buy the dip”: buying when the price undergoes a sharp correction.
But this is apparently not happening.
According to Santiment, both the Bitcoin and Ethereum price collapses are leading to a stagnation in the movement of dormant currencies. Basically, according to the chart, there has been a drop in investment which has also led to a drop in price.
💸 $BTC and $ETH's recent dips are leading to some stagnancy in the dormant coin movement that has really propelled the historic bull run #crypto has experienced. Keep a close eye on this chart, and whether avg. investment ages continue getting younger. https://t.co/D1TsKqt5aW pic.twitter.com/CdMBqbHKJK
— Santiment (@santimentfeed) May 17, 2021
The duration of investments is also falling and seems to be getting shorter and shorter. And this seems to suggest an increase in speculation.
Bitcoin and the saying “Buy the dip”
Buy the dip (or dips) is a saying that is used in financial markets but also in the context of Bitcoin and cryptocurrencies. To be precise, the saying is “buy the dips, sell the rips”. Literally, the dips are the falls (below a certain price), while the rips are the surges (above a certain threshold).
Translated, the saying indicates to buy when the market goes down and to sell when the market goes up. In practice, the suggestion is to invest by taking advantage of the fall in price, the “balances”, so to speak, and then to earn on the next rise, possibly by selling.
This is obviously a saying and not a law of finance, so its validity depends on the individual context.
Why Bitcoin is going down
In this case, the market of Bitcoin and Ethereum has taken a hard hit, with Bitcoin dropping to below $44,000. Ethereum too, from last week’s highs of $4,300, has come down to the current $3,400.
What could have triggered this heavy correction? Probably yet another tweet by Elon Musk, who seems increasingly sceptical about Bitcoin because of its energy consumption.
Just this morning, however, Tesla’s CEO clarified that the carmaker has not sold the BTC it bought in February.
But it is also true that those who live in the cryptocurrency market know that sudden rises such as those underway since October 2020 can be followed by very violent shocks with losses of 10-20% in a short time. This is what has happened in recent days. However, precisely because of this context, it is not a good idea to rely on sayings for future investment strategies. One rule always applies: use caution.