Cryptocurrency’s “buy the dip”: an explainer
Bitcoin’s unsteady cracks were revealed yesterday, when its market value dropped to 10 per cent. Here, we find out whether it’s worth investing during a dip.
Last night, we noticed a fair few people talking about “buying the dip”.
Crypto-nerds are likely to be familiar with the term already, unlike us lot who have been relying on a stream of memes on our Twitter feeds to ill-inform us on a phrase usually synonymous with the financial world.
But what does it mean?
In layman’s terms, “buy the dip” is a phrase used by the online financial market and within cryptocurrency to encourage people to invest when a stock has dropped in price.
Yesterday, Bitcoin suffered a sharp decline as its unsteady cracks began to show. In the early afternoon, its worth dropped below 10 per cent, meaning it has lost around 40 per cent of its value since 13th April, when one Bitcoin was worth a staggering $64,606, according to CBS News.
This decline took place for several reasons. Last week, Tesla announced that it would no longer accept the digital currency as a form of payment, due to concerns over its environmental impact.
The China Banking Association has also warned member banks of the potential risks and volatility associated with digital currencies. Last night, BBC reported that “Beijing banned banks and payment firms from providing services related to cryptocurrency transactions” – a major blow for the crypto-world.
So why are people urging you to “buy the dip”?
Those that use the term generally believe that the stock market “dip” is a short-term event, and that the stock that has “dipped”, like Dogecoin, Ethereum or Bitcoin, will enjoy an inflation in price even greater than its original market value later down the line.
In other words, invest in the dip means reaping the rewards.
Was there a dip in the first place?
As of this morning, it has been reported that Bitcoin is on the rebound. According to The Independent: “Bitcoin has held firm on or around the $40,000 mark overnight, bringing a welcome moment of calm for the markets.”
Online currencies generally fluctuate all the time, with market values sky-rocketing and crashing within minutes.
Have a look yourself on CoinMarketCap, which shows the values of each coin and its ever-changing values.