Should You Buy Crypto After It Crashes?
Seeing the price of cryptocurrencies plummet can be painful for investors. But it also presents potential opportunities for those with an appetite for it.
To determine whether “buying the dip” is worth it, let’s weigh the arguments for and against investing in crashing cryptocurrencies:
Arguments for Buying Crypto After a Crash
While it may seem counterintuitive to buy into one of the worst crypto projects, there are some potential benefits to getting involved:
Discounted Prices: The most obvious benefit is the opportunity to buy on the dip and accumulate at a discount. These fire sales can be excellent entry points for long-term believers in a project.
Taking Advantage of Panic Sellers: Crypto crashes are often exacerbated by panic selling by traders in an effort to escape further losses. Smart investors can counter these selloffs by buying tokens from “weak-handed” traders.
Dollar-cost Averaging: Finally, for those looking to build a position over time, aggressively buying into a crash can enable a more effective dollar-cost averaging strategy. This can lower an investor’s overall cost basis.
Arguments Against Buying Crypto After a Crash
Buying the dip may be tempting, but investors should carefully weigh the risks of investing in the biggest crypto losers:
Recovery Not Guaranteed: Just because a crypto plummets doesn’t mean it will bounce back. Many of the coins that sold off became perpetual losers with no recovery in sight.
Don’t Catch the Falling Knife: Trying to time the bottom during a crash is challenging — even for experienced traders. Cryptocurrencies could continue to spiral downward for a long time, causing further pain for dip buyers.
Further Downside Possible: Even the best long-term cryptocurrencies could face price declines. This selling pressure often leads to an abundance of supply, preventing a much-needed relief rally.
