There’s a term used in cryptocurrency called, “BTFD”. Which stands for, “Buy the F***ing Dip”.
Buying the dip, which means purchasing something when the price goes down, has been a winning strategy for Bitcoin investors since 2009. This concept isn’t new, there are quotes as old as Finance telling you to, “buy when there’s blood on the streets”.
Approach cryptocurrency investing like you approach grocery shopping. You’re looking for the best deal.
When you go grocery shopping, you know what you want to buy, and you have an idea of what its worth. So if you go to buy bananas, but they’re out of season and marked up almost 20%, you might not buy bananas that week.
It’s the same with cryptocurrency. If you believe something has value and will accrue more value in the future, buy it. If you think something is already overvalued, or even if the market has made the value of something increase beyond what you’re willing to spend on it—don’t.
Let’s say that a coin goes from $5 to $20 during an uptrend, only to come down to $10 when the market falls.
Is this a discount from $20 or is it marked up from $5?
It’s both. The coin can go either way, but at this point, given that it’s found its temporary bottom at $10 and hasn’t fallen further. I’d consider it more likely to resume up towards $20 and beyond. On top of that, my downside is $5, and my upside is $10.
This example is extremely over-simplified, but you get the gist. In reality there are many more variable that need to be considered when weighing risk vs reward.
Smart bulls buy pullbacks, no doubt about it. And there's good, quantifiable reason for it.