Buy low; sell high. It’s an old adage, oft-repeated and simple enough to be taken for granted by most that understand it. But not everyone does understand it. And that’s because not everyone trades. But this may not be the case for altogether long; after all, consumer uptake of retail investing apps like Robinhood is continuing apace, while wider understanding of the potential within stock markets and assets trading grows too.
Part of the new national interest in trading and investment has come from the rise and rise of the digital asset, precipitated by Bitcoin and propelled into the stratosphere by new cryptocurrencies, blockchain opportunities and more. And Bitcoin is now a key contender for financial investment and gain, via shrewd trading – which brings us back to ‘buy low; sell high’.
Here, we’re going to look at this old adage in detail and in order, as an exploration of why some traders and investors pay close attention to Bitcoin during periods of market decline (or ‘market dips’). In the same way, your own investment decisions could benefit from market downturns, particularly if you have the long term firmly in mind.
1) What Is a Market Dip and Why Does It Happen?
First, though: what do we mean exactly by a market dip? And why does it happen? In short, a market dip describes a general downward trend in the value of a category of financial assets. An advancement in AI might test the financial strength of companies not currently utilizing it, resulting in a downturn in value for those companies; a gold mine collapse in South Africa might cause the value of gold to spike, but the value of gold mining companies to crash.
These examples are glib to the point of unlikeliness, but they hopefully demonstrate the market dip as a consequence of external factors more so than random chance. The fluctuating value of things is something you see everywhere; this volatility, though, is cause and effect in action. With a digital asset like Bitcoin, the cause is often changing supply and demand. Just as a glut of onions flooding the local farmer’s market would devalue the individual onion, the offloading of Bitcoin into a live market would cause a short-term price decline.
2) Why Some Traders View Dips as Opportunities
Of course, this is a function of the stock market – and of trading, more broadly. It is also an opportunity for investors with an eye to shrewd growth. By following the news surrounding certain markets and by observing dip patterns, investors can turn downturns into long-term earning potential, using the dip to enter or increase positions in a given asset.
3) Different Ways to Access Bitcoin During Market Dips
Bitcoin is a valid means of generating growth in this manner, though a little less readable than industrial stocks and shares. Still, should the price of Bitcoin fall significantly, there may be an opportunity to profit on its prospectively-inevitable return to growth. A trader might use a Bitcoin ATM to convert cash into Bitcoin, buying low with a view to sell high when prices improve.
4) Understanding the Risks of Buying During Declines
Of course, this is a risky trade – as all trades are. No one can tell the future, just as no one can truthfully predict with 100% accuracy whether the price of Bitcoin will rise again or keep falling. This is where your appetite for risk as a trader comes into play, not to mention the importance of research, financial resilience and the avoidance of emotional decision-making.
