A dip is when markets experience a short or protracted downturn.
What Is a Dip?
Dip means to put or let something down quickly or briefly into liquid in the traditional sense. However, in the world of cryptocurrencies, a dip is the process of buying an asset after it has declined in value. Buying a dip implies that you have an opportunity to invest in a coin or token that has experienced a short, or potentially long-term decline in its value.
Many cryptocurrency investors only became familiar with the crypto market after the downturn of the cryptocurrency market all the way back in 2018. In fact, it was throughout this year that plenty of investors managed to learn how risky and speculative the crypto market can actually be. But buying a coin or a token in a downtrend does not actually mean that its price is guaranteed to increase over time, as there are risks involved with just about anything you do in terms of investing.
You need to have strong emotional intelligence and understand the nature of the market you are engaging in.
You have a phrase in regards to dips and investing: “buy the dip.” This refers to going long on an asset or security after the price has experienced a short-term decline in repeated ways. Through buying this dip, you can profit through its long-term uptrends, however, it is unprofitable or tougher during secular downtrends.
Dip buying even has the capability of lowering your average cost of owning a position; however, the risk, as well as the rewards of dip-buying, needs to be evaluated on a consistent basis.
Keep in mind that buying the dip does not in fact mean that you are guaranteed any profits. An asset can drop for a multitude of reasons, and these include changes to its underlying value. Just because the price is cheaper than it ever was throughout its history does not imply that the asset represents good value.