What is BTD or BTFD?
If you’re a crypto investor, you’ve undoubtedly heard the words “buy the dip” a thousand times before, especially when a coin’s price drops. But what does it mean to buy the dip – and is it a good idea? Read on to find out all about this ubiquitous term and learn how to properly buy the dip!
What Does Buy The Dip Mean?
“Buy the dip” simply means buying an asset after a price drop. This applies to many commodities and investment vehicles, be it crypto, NFTs, property, stocks, and many others. The “dip” itself usually refers to an asset’s short-term price drop.
Buying the dip is a popular investment tactic because most people see these market dips as a short-term drop as well as a bargain because you can buy assets cheaper. This investing strategy is best used during long-term uptrends when dips are only “speed bumps” along the way of the asset’s price increasing.
Where Did Buy The Dip Come From?
The phrase “buy the dip” was already a common phrase among retail investors before it rose to popularity in the crypto community. However, cryptocurrency investors developed it further into the acronyms BTD and BTFD. As you might expect, BTD stands for Buy The Dip. Meanwhile, BTFD is a more spirited version of the term that stands for Buy The F***ing Dip.
Does Buying The Dip Work?
Buying the dip is popular – but does it work? Some experts say that buying the dip is like catching a falling knife. Sure, you can catch it, but there’s a chance that you end up cutting your hands in the process. By definition, it’s a risky move.
Dip buying on the stock market is a less risky proposition since most stocks are tied to a company’s fundamentals. As long as the company does well, your stock won’t plummet.
However, buying the dip in the cryptocurrency market is much riskier since some coins are fickle and do not have strong fundamentals. Since there’s no guarantee that prices will go back up, that dip can easily turn into a canyon that’ll take a long time to get out of – if you can get out at all.
However, we’re not saying that it doesn’t work. If you can stomach the risks, choose a coin with great fundamentals, and carefully plan your purchases, buying the dip is a viable strategy that could net you high returns.
Tips If You Want To Buy The Dip
Buying the dip isn’t a terrible investment strategy if you know what you’re doing. Here are five ways you can mitigate risk when buying the dip:
Know The Trends
Buying the dip works best when the coin is in a bull crypto market because the prices are trending up. BTD-ing in a bear market is a risky idea if you’re not a good short-term trader. Even then, buying the dip in bear markets is usually not the best idea.
Understand The Dip’s Reasons
Keep an eye on the crypto space and find out why exactly this coin is dipping. Was it because of overbuying, or was it because it failed to reach an ATH? Generally, bad news causes the coin to keep dipping while good news can be the signal that the coin or share price is going up again.
Plan Your Stops
Don’t get greedy, but don’t risk it all either. Before you buy, always set a point to take your profits or cut your losses – and stick by them. Planning stops prevent you from losing too much as well as ensure you’ll make a profit when the prices go up.
Play It Safe
If you want to play it conservatively, you can move your entry and exit points. Instead of buying at the bottom of the dip and selling at the peak of the rise, you can wait until prices rise slightly after a dip to buy and wait until the peak starts falling a bit to sell.
You might miss the peaks and valleys, but it’s a safer bet because you waited for confirmation whether it’s a downtrend or an uptrend.
Explore The Alternatives
Buying the dip isn’t the only way to buy crypto. Another common investing strategy is dollar-cost averaging. Dollar-cost averaging is a short and steady way to invest where you buy coins incrementally. Because you’re buying both the highs and lows, dollar-cost averaging reduces your risk and increases your likelihood to profit.
Buying the dip is one of the most popular crypto investing strategies for a reason. It’s generally a reliable way to achieve gains, especially in a bull market. However, you still need to consider things like your timing and buying strategy so you don’t accidentally buy a dip that’s still dipping.
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