“Buying the dip” has gone mainstream. Celebrities buy the dip. Politicians buy the dip. Now the price of bitcoin is down, and you want to buy the dip too. Should you?
3 Reason To Buy The Dip
1. You Have Cash On The Sidelines
If you're denominating your savings in bitcoin and have cash on the sidelines, what are you waiting for? You've been around long enough to know that bitcoin is going to a million dollars, so it doesn't matter if you buy at $50k or $40k.
Looking back, when you were worried about the price of bitcoin at $20k or $18k, was all that stress worth it? If the price could go back to $3k or $5k would you really care how much you bought?
Too many people worry about buying the exact bottom. As many times as you guess right, there are going to be just as many times as you guess wrong. You have some cash on the sidelines that's not working for you. Are you really going to leave it in the melting ice cube of fiat currency?
2. You've Been Waiting For A Dip
Price psychology is interesting. I can't find the tweet right now, but there's a very accurate meme out there which shows a man bathing in riches after a bull run when the price hits $29k in January 2021, then looking like a homeless person when bitcoin hits dips back to $29k in July 2021 after peaking at a much higher price.
The idea is simple. On the way up, we feel rich. On the way down, we feel poor. Bitcoin feels like it's going to the moon during a bull market, and it feels like everything is over in the bear market.
Defeat your own psychological bias!
Whatever your price target is, the price may not go that low. When bitcoin dropped from $64k down to $29k, I have friends who were waiting to buy bitcoin at $20k because they thought it was going to dip further. It didn't.
You told yourself you were going to buy this dip, so do it. If you are so concerned about missing the bottom, just do half now and half later.
There are too many cautionary tales of people waiting… and waiting… and waiting… for a dip that never comes.
3. You Haven't Stacked This Month
There will be pumps and there will be dumps. There will be rips and there will be dips. It all kind of comes out in the wash if you're stacking sats every month. It's impossible to perfectly time the market, so just dollar cost average into a bitcoin position over time.
Bitcoin isn't a get rich quick scheme. It's a don't get poor slowly scheme.Jameson Lopp
If you haven't bought bitcoin this month, what's stopping you – a bigger dip?
One thing that's helped with my own bitcoin buying strategy is defining what a dip actually is. For me, anything less than 10% isn't even a dip, and I don't really pay attention to it. A 20% haircut absolutely is a dip worth buying if I have any sort of cash on the sidelines intended for long term savings. In between, it kind of depends on my mood and the market. That's my own strategy. You can define a “dip” for yourself.
Once you have some clearly defined criteria for when you should or shouldn't buy bitcoin, such as “once per month or any time the price dips more than 10%”, it's a lot easier to continue to stack bitcoin without getting too emotional about it.
3 Reasons You Shouldn't Buy The Dip
1. You Think It's The Bottom
If you think a dip is just a single event, you are wrong. Sometimes the dip keeps dipping. When bitcoin dipped from $20k to $18k back in 2017, I thought for sure I was buying a 10% dip. Just a few months later, we were sitting at $3k.
It's not uncommon to feel like you move the market yourself, as you buy a fat stack of bitcoin and it loses another 10% right after you buy. More recently, the price dipped from $57k down to $49k and I thought I was slick catching the bottom at $49k.
Then the price wicked down to $44k and I was pretty unhappy. Then it slowly climbed back up to $51k, and I was happy again. Over the next couple of months, it slowly fell back down to $43k, where we sit right now. If I had just waited, I could have gotten the real dip!
Of course, nobody knows which way the market is going to go. Don't buy the dip thinking that you hit the bottom. Only time will tell if you are right or not.
2. You Read Some Technical Analysis
The top reason to never buy a dip is because of some bullshit technical or on-chain analysis you read online.
Most importantly, understand that technical and on-chain analysis are just that. It's a picture of what the market looks like right now, not what the market is going to do. There are countless times where a “bottom” has been declared, and then, due to no triggering event at all, the bottom broke through.
Calling a bottom by drawing lines on a chart does not guarantee anything at all. Instead of thinking of it as “this is the bottom”, think of it as “this might be the bottom”, and you'll be way less likely to get excited about some chart you read on Twitter.
Aside from that, also consider that many things you read online are not what they seem. Sometimes people post things to create the opposite effect. Especially when reading information from big accounts with pseudonyms, always keep in the back of your mind the thought that you could be getting played.
The famous trader Zhu Su tweeted on December 8, 2021 that we should “buckle up”. Everyone was expecting a massive bull run from $50k to $100k over the next couple weeks, since PlanB's stock-to-flow model predicted $100k bitcoin in 2021. Buckle up everyone. Here's comes the bull run!
Then… nothing happened. No bull run. No crash. We just lost momentum from $50k down to $41k over the course of a couple weeks, and then there was a dip down to $35k in the middle of January.
What was the meaning of this tweet? Nobody knows.
3. You're Out Of Cash
I'm guilty of this one, so can speak from personal experience. As I said in #1, sometimes, the dip isn't really the dip. Recently, I set a personal goal of acquiring a specific amount of bitcoin. Then Bitcoin dipped from about $52k down to $48k in late 2021. I had been telling myself I would buy if bitcoin ever dipped so I could complete this personal goal of mine, and I successfully bought the dip… with my emergency savings fund.
Unfortunately, I had a couple of surprise bills come up a few weeks later. Great timing, right?
Because I bought that bitcoin, I didn't have the cash to pay those bills, so I had to put them on credit cards. Now I've got a stack of bitcoin I refuse to sell for 10 years, and a bunch of credit card debt with 20% interest.
Sure, it felt good buying the dip and meeting my goal, but now I've got to pay off this credit card debt for the next couple months, which sucks. What sucks more, is that the dip wasn't even the bottom, so those bitcoin purchases are in the red.
Of course, I didn't do something stupid like take out a second mortgage on my home, and I'll be able to easily pay off this debt in a few months, but I just wanted to tell a personal story of how you can have fun buying a dip, but it can have negative consequences in the future if you don't have a proper money management plan in place.
Where Should You Buy The Dip?
So, you decided you want to buy the dip – where should you buy your bitcoin? Personally, I recommend getting it from a bitcoin-only exchange. My favorites include Swan and River, then Bull Bitcoin for Canada, Bitaroo for Australia, and Coin Floor or CoinCoiner for the UK. If you want to use your smartphone, then CashApp or Strike are available in many countries and make it super simple to connect your bank account and buy bitcoin instantly.
There are many other popular exchanges out there, but they tend to offer tons of altcoins and incentivize ownership and trading of these “assets”. The trouble with altcoins is that sometimes the dip is the final one, and the price just never recovers to its previous all-time high.
Final Thoughts: There Will Always Be Another Dip
Should you, or should you not buy the dip in bitcoin price? It depends on a lot of factors, and I can't give you specific financial advice. In my own dip-buying adventures, I've had some successes and some failures, and learned plenty of lessons along the way.
My #1 piece of advice is to not overextend yourself and not buy with money that you'll need in the next couple of years. This is, of course, good advice for any type of investing, but is especially true when buying bitcoin.
Bitcoin is savings technology. Bitcoin is a way to preserve wealth, not to create it. Don't get caught up in the hype. Buy the dip if you can, but don't stress if you can't. There will always be another dip.