In the past couple of months, the value of crypto rose to almost $1 trillion, which gave investors and crypto enthusiasts a lot of hope for this digital gold. This was until the value of Bitcoin suddenly took a plunge in the third week of November – going down heavily from $68,000 to below $56,000.
This sudden state of affairs saw many investors sell their investments in crypto and cut down on potential losses. But traders who have had plenty of experience in investing saw this as a rare opportunity to make more. In market terminologies, this is often referred to as ‘buying the dip’. These investors will pick up cryptocurrencies at cheap prices ahead of the next rise in market rates.
Market participants have to pay special attention to the principle of notional loss versus an actual loss. While those who held on to their investments saw a notional loss in value, they will still be able to recover it as this dip in value is quite temporary. On the contrary, those who rushed and sold off their investments after the sudden dip will suffer from a permanent loss, as they will have less money ‘in hand’.
How to invest now?
The people who are confident in the specific cryptocurrencies they have invested in can abide by one simple rule – invest differently in different market conditions. This means that they can buy crypto even when others are actively investing and also when others are fearful of the market conditions.
Of course, not everybody has a high appetite for risk. In such cases, it is best to invest time and energy into learning more about the coins in their current portfolio before they decide to buy more or sell what they have.