WHAT TO DO DURING A LONG-TERM DOWNTREND?
If you own cryptocurrency that has been in a long-term downtrend it’s recommended to either hold onto them or try selling them at their highest possible prices. Don’t panic sell because this could result in you losing money instead of making it.
Risks When Buying The Dip
As much as buying the dip is a sure way of making money in cryptocurrency, it’s not without risks. Here we look at 5 risks you should consider before implementing this strategy:
1. The Price Could Keep Dropping
Even though you bought when prices were low, they might drop even lower than that and then never go back up again. This is unlikely, but it could happen if the cryptocurrencies you’re investing in are not close to mass adoption and their development teams don’t have any concrete plans for them yet.
2. You Could Lose Money During A Dip
Buying during a dip might seem like a good idea but you could still lose money doing it. This is especially true if you bought at the same price that’s even lower than what it was before the dip started. If this happens, then you’ve effectively lost money while waiting for prices to go back up again.
3. The Market May Be Manipulated
Due to the fact that cryptocurrency prices are driven by sentiments and expectations, they’re very manipulatable. This means that certain people can take advantage of buying at dips to make profits while pushing the price back up again and sell later for a higher profit margin. It’s hard to tell when this is happening or who exactly trades like this, but it does happen all the time which is why it’s a risk you should keep in mind while thinking about buying when it’s downtrend.
4. The General Market Might Be Unstable
Even though you bought the dip in one particular cryptocurrency, its price might still drop because of problems happening in the general market. For example, let’s say there is a large-scale selloff across all cryptocurrencies which could result in the prices dropping significantly across the board regardless of your cryptocurrency’s price trend.
5. The Market Might Experience Another Downtrend
Even though you bought the dip in one cryptocurrency, this could still cause it to experience another downtrend. This is especially true if the price trend that led into your buy-low strategy has just reversed itself and will continue going down even lower. The point here being that there are never any guarantees when it comes to cryptocurrency markets and you should never base a long-term investment decision on what happened over the course of 1 or 2 days.