LUNA - Thinking of Buying the Dip? Here's What Crypto Investors Need to Know
In the wake of the broad crypto market sell-off triggered by the collapse of cryptocurrency exchange FTX (CRYPTO: FTT) , it could be time to rethink some of the most popular crypto trading strategies. The one that immediately comes to mind is to buy the dip, which has become the go-to move for many crypto investors. This simply refers to buying a crypto when it has declined in price, and then profiting once the price returns to its previous level.
This strategy works best in a market that is trending up over time. But what about a market that is trending down? As some crypto traders like to point out, what do you do when the dip keeps dipping? With that in mind, here are a few things to remember if you're thinking about buying the dip.
In 2022, the term "buy the dip" has become overused. People casually use it to describe buying a crypto anytime it falls in value. But this makes it hard to distinguish between different types of price declines, and it encourages market timing. For example, earlier this year, people were talking about buying the dip with Terra Luna (CRYPTO: LUNA) , which ended up collapsing and wiping out roughly $40 billion in market value. No doubt, we'll soon be hearing how we should be buying the dip on FTX. But take a close look at the chart for FTX: That's not a dip, that's an Acapulco cliff dive.
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Thinking of Buying the Dip? Here's What Crypto Investors Need to Know