With Bitcoin being at all time highs it was a matter of time before everyone jumps on the bandwagon. The drop in price, which has started June 21st, has continued to be a bumpy ride and will continue for the next couple days. Just like stocks or currency the value will go up or down. Bitcoin or any other cryptocurrency falls right in this category. If you want to get your feet wet in any cryptocurrency now is the time. Let’s say you are already invested in Bitcoin or others and you bought high this is perfect time for you also. Let me explain..
What I am referring to is buying the dip…
“Buy the dips” is a slang phrase referring to the practice of purchasing stocks following a decline in prices. After a significant dip in the price of a security or stock index, investors should increase positions or purchase different stocks to capitalize on what is seen as an eventual upswing.
To break this down even more. When the price of a stock, or in this case bitcoin, drops substantially you buy when it is low. This allows people the ability to enter into cryptocurrency at a lower cost, or if you have bought bitcoin at a higher rate you can buy more and lower the overall cost of the bitcoin.
Don’t follow what I mean by lowering the overall cost?
For example, we will use gold. The cost of 1 oz of gold is 1000 dollars. You purchase 2 ozs on Monday. Wednesday the price of gold crashes and is now worth 500 dollars per oz. You have now lost 1000 dollars because you have bought them at 1000 dollars per oz. You in turn buy 2 ozs on Wednesday at 500 dollars. Now you have 4 oz of gold. For all 4 oz of gold you spent 3000 dollars. So if we divide 3000 by 4 we get 750 dollars. So now our overall cost per oz is 750 dollars. We have 4 shares and still are negative 1000 but we have doubled our shares. We only need gold to raise to 750 to break even not 1000 dollars which is might not get back up to.
Let’s do one more. Instead of buying 2 ozs at 500 we bought 5. We now have 7 ozs of gold. 5 at 500 and 2 at 1000 for a total of 4500 dollars. 4500 divided by the 7 ozs we have comes out with $642.85 dollars per oz. We now only need gold to go up to 643 to make a profit.
Buying the dip does have its warnings. The dip can keep dipping. I have had a stock lose almost all its value, when I say all its value, I bought at nearly 20 dollars and the stock dropped to 9 dollars within hours. I sold with an average share value of 14 dollars when it hit 9 dollars. I lost allot of money within a small window. It was one of the hardest lessons I had to learn.
If I went through that in my past why do I recommend buying the dip now? Research. I do my research on stocks or anything else I am investing in. I should have seen the stock was going to collapse but I rode the hypetrain.
Hype Train is a slang term used to describe the high level of anticipation surrounding an upcoming release of a popular media franchise or an announcement of a new project, especially for video games, movies and TV series
In this case the high level of news and hype over a stock doing so well I was only thinking of the profits and not the downfall. I jumped on the train without even reading a spec of news or article about the stock. Do your research and if you feel ready to jump on board then do it.