The crypto market is known to be highly volatile, often leading to a shift in market sentiment. When the market witnesses a price correction, several investors tend to dump their assets to minimize their losses. However, many others follow the “buy the dip” strategy, as it often pays off. History suggests that the market always recovers when investor fear is at its peak, giving investors the opportunity to maximize their profits.
Never miss an opening again
To begin with, buy the dip is a popular investment strategy that revolves around acquiring assets at a lower price in the hope that the market will recover. Choosing this strategy has been useful when the price of a cryptocurrency drops due to the doings of a third party and not based on the asset’s use or performance in the real world. Therefore, buying at such a time gives investors the opportunity to increase profits as the market is most likely to rise.
The dip in the crypto market of 2021
The crypto market experienced a decline in early 2021 due to various reasons, including the war between Russia and Ukraine. In that time, From Bitcoin [BTC] price dropped from $60,000 to drop below $30,000, a nearly 50% drop in value. However, the market quickly recovered as in just a few months the price of BTC rose up the charts.
In November 2021, the price of the crypto reached an all-time high of over $64,000. However, the crypto winter followed, causing the market to collapse again. Ethereum [ETH] also saw a similar price trend during that period, when the price hit an ATH of >$4,700.
Did investors buy the dip?
During the 2021 episode, a look at BTC’s on-chain stats clearly revealed that investors were buying into the dip. According to Santiment’s chart, supply on exchanges fell after November, when the price of BTC plummeted.
This happened while BTC‘s off-exchange supply rose – A sign of increased accumulation.
Source: Sentiment
Not only BTC, but also ETH statistics conveyed a similar story.
The supply of Ethereum on exchanges fell, which was accompanied by an increase in supply outside the exchanges. Moreover, the chart also revealed that the supply of ETH held by top addresses also increased, reflecting investor confidence in the token. However, ETH’s network growth slowed over that period, indicating that fewer new addresses were created to transfer the token.
Source: Sentiment
2022 was no better
The series of accidents did not end in 2021. The following year started on a sour note and was made worse by the collapse of Terra LUNA. It seriously affected the prices of all cryptos, the effects of which are visible to this day.
However, it was interesting to see that there was also a similar buy the dip trend during that period as investors remained confident in a change in the fate of the market in the coming years.
Will the market revive itself soon?
While the first quarter of 2023 was better as the market gained bullish momentum, the good days were short-lived.
Straight away, BTC appears to have settled below the $28,000 level – A concern for investors. However, this could be a good opening for investors to accumulate or rather “buy the dip” before BTC’s price action turns bullish again.
BTC halving is less than a year away
Bitcoin will undergo its fourth halving in the month of April next year. If we are to believe history, the price of Bitcoin may skyrocket after the halving.
For example, during Bitcoin’s 2020 halving, it was valued at $8,500, but took a few months to climb above $27,000. A similar trend was seen during the first Bitcoin halving. Bitcoin’s value rose significantly in November 2013, after its first halving in November 2012. Therefore, this could be an opportune opportunity for investors to accumulate BTC.
Read From Bitcoin [BTC] Price prediction 2023-24
Investors are still in accumulation mode
A similar increase in the amount of off-exchange supply was also seen in last month’s chart, indicating that investors were still buying. Not only that, but the BTC Binance funding rate was also significantly high.
A high funding ratio is a sign of demand in the derivatives market. Positive sentiment all around Bitcoin is also high – A sign of investor confidence in the king coin.
Source: Sentiment