Buying on Dips: Is it the Right Time to Buy Bitcoin and Cryptocurrencies?

Last year provided cryptocurrency investors with exponential returns, with the talk of bubbles doing little to deter the inflow of investor money through the year. The cryptomarket’s total market cap crossed the $800bn mark in the first week of January before the talk about a correction saw the market cap give up more than $300bn to 2018 low $428bn and change on 17th January.

Adding to the allure of the cryptomarkets is the fact that Bitcoin no longer dominates the space, with Bitcoin’s market cap dominance falling from as high as 86% in the early part of last year to 34% by Friday’s close.

With more than 1,400 cryptocurrencies to choose from, buying on the dips may not be for the faint-hearted, but does give the rewards that are justifiable when considering the risks involved.

Knowing when to jump back in and being able to sit it out until the slide has come to an end and it goes without saying that it’s better to buy on the up than on the down. It’s also worth considering which of the cryptocurrencies saw the heaviest losses, as these are likely to see a more significant post-crash rally. Such a process does require some caution, however. When looking at the cryptocurrency list, it would be wise to select currencies that come from a project or company that has a promising future and has already made some inroads into delivering its blockchain tech to the marketplace.

Last week’s moves were sizeable. Bitcoin recovered from 2018 low $9,222 to $10,200 at the time of writing, while Ripple and Stellar Lumens saw more spectacular recoveries. The moves were more akin to a crash than a correction, which was reflected by the fact that many of the major cryptocurrencies recovered to pre-Crash Wednesday levels. A correction would have left the cryptocurrencies close to Wednesday’s lows.

The good news for investors looking to get into the cryptomarket is the fact that many of the cryptos are still sitting well below their respective all-time highs.

In spite of Ripple’s relief rally last week, Ripple is still down 53.8% from its all-time high at the time of writing, with Bitcoin down more than 45%, which means that there could be more upside on the horizon. The total market cap declined to $5127bn, which is still well below its pre-crash levels, with investors still sitting it out.

Investors ran for the hills in fear of the cryptocurrency bubble bursting. What the market has demonstrated its resilience and as the dust settles from the South Korean government’s threats to shut down the country’s crypto exchanges, investors money is likely to return. After all, it’s significantly harder to make similar gains in the more mature asset classes.

For investors that do enter the fray, it’s a choppy world out there and it does require a cool head. The cooler heads held it together last week, which provided significant support to the cryptocurrencies when it was needed. Choppy and volatile markets are drawing experienced traders from other asset classes. Buying on the dips is a profitable game if it’s done calmly and correctly.

To cater for the increased appetite for cryptocurrency trading, the number of trading platforms have been on the rise and also support cryptocurrency CFD trading, which is a popular alternative to holding the actual cryptocurrency, with traders able to trade on margin, enhancing returns with the use of leverage.

SimpleFX is one such platform that has evolved their offering to include cryptocurrency trading. When asked what the coming year holds for SimpleFX and their cryptocurrency customers, SimpleFX replied: ‘We will definitely keep on developing our offer, all the while keeping it simple. The next thing on our agenda will be to launch a completely new trading platform for desktops. This is bound to be an eventful year for cryptocurrencies. Regardless of how the situation is going to unfold, we’ll be there to help you capitalize on the trading opportunities that will definitely appear.’