Two Questions You Should Ask Yourself Before You Buy The Dip

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Bitcoin, the leading cryptocurrency has yet again dipped, falling below $34,000. The crypto juggernaut went down by 17% in the past week according to Coinmarketcap, 40% down from its November high. As you would expect this is the same for other major ALTs such as Ethereum.

 

https://twitter.com/heswaikcrypt/status/1484386466847510528?s=20

 

The sudden crash is believed to be the outcome of the Russian Central bank’s proposal to ban crypto. On January 21, the bank announced that there would be a proposal to the Russian Government to ban the use and mining of cryptocurrency.

 

In their Consultation Paper, the Central Bank of Russia described the risks caused by cryptocurrency to financial stability and economic security. In the Consultation paper, they explained the risks of the growth of crypto being spurred by “speculative demand”.  “In the long run, the potential of using cryptocurrencies for settlements seems limited. The rapid growth of their market value is predominantly spurred by speculative demand and expectations of a further rise in their prices, which leads to the formation of a bubble in the market. Cryptocurrencies also have signs of a financial pyramid as increase in their prices is largely driven by demand demonstrated by new market participants”, they said. 

The Central Bank estimates that Russian citizens’ transactions using decentralised cryptocurrencies amount to $5 billion per year. Russia currently ranks third in the global crypto mining market behind the United States and Kazakhstan. 

 

During dips, we have two types of crypto investors, the one that goes into sudden depression and the one that looks at it as an opportunity and buys the dip. These two types of investors have something in common;  they have equal chances of regretting their next actions. The first investor might decide to sell instead of holding on to his crypto or “hodle” and boom 12 hours later the coin pumps by 400% and they have just lost his chance of being a crypto millionaire or billionaire. 

 The second investor on the other hand can decide to buy the dip or even double their initial investment and gradually -20% will dip to -50% and -50% will dip to 75% and before you know it crypto investing has turned a rich and happy investor to a very poor and very sad investor.

 

https://twitter.com/Seangara_/status/1484339242834993156?s=20

 

However, as you would have already guessed from the topic of this article, I am going to be focusing on the second type of investor today. Here are two very important questions you should ask yourself before buying the dip.

 

#1 “Do I have money to Spare?”

The volatility of crypto is not new to anybody, even to non-crypto investors. If you have important things to do with your money, like buying food or paying off bills or debts, you shouldn’t even consider buying the dip. A common rule with investing especially with something as volatile as crypto is that you should never spend what you can’t lose. Although the future of crypto and blockchain is promising it can still fail, this leads me to question number 2.

 

#2 “Do I even believe in the prospects of the blockchain and cryptocurrency?” 

Although we have seen big moves made to see the success of Crypto, such as countries like El Salvador making it its legal tender and other chances of other countries following suit. However, we have still seen moves that can lead to its failure. We have seen countries like China and Iran making policies to ban the use of crypto with Russia now on the move as well. If you are just investing in crypto because you want to get a 50% or 100% pump in a month you are probably buying a ticket to heartbreak island. If however, you invest in crypto because you believe it is the future or you believe it can make the world a better place you won’t mind if there are little setbacks because you believe in 10 years to come crypto will be the new normal.

 

If you ask yourselves these questions and answer them honestly before you buy the dip the chances of you regretting it would be negligibly low.

 

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Disclaimer: The views expressed in The Coin Times are solely those of the authors cited. It does not constitute The Coin Times recommendation to buy, sell, or hold any investment. Before making any financial decisions, it is recommended that you undertake your own research. Use the information supplied at your own risk. For additional information, please see the Disclaimer.

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