Buy the dip – Why a price drop can also be an opportunity
3 min readCrypto Year 2024 is, to say the least, exciting. The first quarter remained extremely positive, with Bitcoin reaching its new all-time high of $73,680 in March 2024, and meme coins being big winners with an average return of 1,300%. However, at the beginning of the second quarter, the crypto market once again provided investors with a cold, volatile environment. Currently, short recovery phases alternate with longer corrections. For example, at the end of July, Bitcoin was still scraping the $70,000 mark. But today, crypto investors had to be very brave and unfortunately had to bring a large portion of resilience with them. Over the past 24 hours, there has been a significant recovery, but just yesterday the total market capitalization fell by nearly 7% and Bitcoin even dropped below the $50,000 mark. At the time of writing, Bitcoin is trading at approximately $56,000, an increase of about 10.3% over the past 24 hours.
Why is Bitcoin falling?
Stock and crypto markets are now much more closely linked than some crypto enthusiasts might like. The Japanese Nikkei index fell by about 12% (the biggest loss since 1987) and the DAX fell accordingly. The reasons include weak labor market data from the USA. Adding to this are poor quarterly numbers from Big Tech companies and, of course, the geopolitical situation with the crisis in the Middle East. The VIX index, a key risk indicator for markets, rose above 50, evoking memories of the panic caused by the COVID-19 pandemic and the financial crisis in 2008. In the last 48 hours, long leveraged positions worth around $1 billion have been liquidated in the crypto market. Of that, Bitcoin accounted for roughly $305 million. Moreover, it is not just Mt. Gox that has begun to repay its creditors. Genesis also announced repayments.
Why a cryptocurrency crash is also an opportunity – Buy the dip
A look at the current numbers is, of course, anything but pretty. Naturally, the crypto doomsday prophets are circling again, proclaiming the end of all coins.
Bitcoin 2024 Halving 🚀pic.twitter.com/WFnnJKZiZ0
— naiive (@naiivememe) August 5, 2024
To understand why such a massive price drop can also be an opportunity, let’s go back in time at this point.
Specifically to 2022, which was a rather tough year for the crypto market. In May 2022, the Terra Luna cryptocurrency crashed. When founder Do Kwon began selling large amounts of Bitcoin to stabilize his currency, the price plummeted and altcoins followed suit. By the end of June 2022, BTC was trading at only $20,000.
In November 2022, FTX, the world’s third-largest crypto exchange, collapsed, and prices fell again. In December 2022, Bitcoin was just around $16,000. However, investors who got involved then and have held their coins until today are likely quite satisfied with their investment. Solana was hit particularly hard by the FTX crisis, and in January 2023 its price was just $9. Currently, SOL is trading around $143. In July 2023, Bitcoin was trading at approximately $29,000. Investors who got involved then and still hold their coins can still look forward to an 88% return.
Conclusion
Everyone, of course, must decide for themselves whether it is worth getting into cryptocurrencies or not. But despite all the turbulence, the crypto market has always proven to be robust, as can be seen from the long-term returns.
