by Cody on 2021-02-24 filed under Crypto Investing
Remember when we posted 1 week ago about Bitcoin reaching its all time high? Well, since then, it has gone down quickly. Now what?
If you're an outsider to crypto investing, this volatility could scare you away. People begin to think of crypto as a bubble, exit their crypto holdings, and the market suffers. We have lived through a number of Bitcoin ups and downs, and would like to share our framework for handling Bitcoin price drops.
Personally, I think it is a bad idea to make an emotional decision about an investment. We will go back to what we said when Bitcoin was skyrocketing.
Here's a simpler way to think about investing in Bitcoin (or anything else), regardless of its price: do I expect Bitcoin to go up in price? If so, buy. If not, don't buy. You can ask that whether it's $1 per BTC or $100,000 per BTC.
This actually means that major price decreases are a good investment opportunity. As long as the price is going down, you can buy more. Buy the dip. If you had done this consistently over the past 5 years of Bitcoin, you would be driving a gold-plated Tesla to your diamond farm.
Now, how do you actually buy the dip when prices are tumbling? I find it much easier if I rely on a computer to tell me this, rather than getting brave and deciding on my own. Set up a price alert on your cryptocurrencies. You can configure this via your crypto exchange like Coinbase or Binance. There are also third party sites that you can use, like crytocurrencyalerting.com which can alert on a lot more than just price swings.
Here's a simple rule that works for us: if one of our core crypto holdings goes down by -10% in a 24 hour period, we buy. This is true whether the market is up or down. And we believe so much in this role, we actually wrote a program that executes on this 24 hours a day.
It's the early days of crypto. More volatility is coming. You can profit from these dips with the right tooling and attitude.
Disclosure: I/we have a long position on Bitcoin. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Big Time Crypto).
Additional disclosure: Disclaimer: I am not an investment advisor, and this article is not meant to be a recommendation of the purchase or sale of cryptocurrency. Investors are advised to review all documents and press releases to see if the cryptocurrency fits their own investment qualifications.