Thread: Does it make sense to always buy the dips?

Does it make sense to always buy the dips?

“Buy the dip.”

You hear this all the time in crypto investing. It refers, of course, to buying more bitcoin (or digital assets) when they go down in price: when the price “dips.”

Some people brag about “buying the dip," showing they know better than the crowd. Others “buy the dip” as an investment strategy: they’re getting a bargain.

The problem is, buying the dip is a fallacy.

You can’t buy the dip, because you can't see the total dip until much later.

First, I’ll explain this in a way that will make it simple and obvious to you; then I’ll show you a better way of investing.

You Only Know the Dip in Hindsight

When people talk about “buying the dip,” what they’re really saying is, “I bought when the price was going down.”

Here’s a look at the price of bitcoin from earlier this year. When it dropped to $39,000, El Salvador President Nayib Bukele proudly tweeted that his government had just purchased an additional chunk of bitcoin: that it “bought the dip.”

But the next day, the price of bitcoin dipped further, to $34,500:

Could you “buy the dip” then? No, because the next day, it dipped further still, to $33,500:

Why “buying the dip” is probably not the best economic policy.

We could take any time period, for any cryptocurrency, and show this same principle: you can only see the dip in hindsight, after the price has gone back up.

This assumes, of course, that the price will go back up. There are plenty of investors who “bought the dip” on their favorite token, only to find out it wasn’t a dip, but a ride off a cliff.” - John Hargrave

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