In the three months between October 22 2021 and January 22 2022, Bitcoin crashed over 52% in price.
Many would consider it alarming if the stock market had a fall of this magnitude over such a short period of time.
However, while some were concerned by such a large fall on Bitcoin, the majority pretty much ignored it and were treating it as an opportunity to buy more Bitcoin at a cheaper price.
But is this really wise?
Due to the significant rise of Bitcoin over the last decade, many are treating it as something that just continues to rise and while this was somewhat true in the earlier days of Bitcoin, it is now not the case anymore.
In the 24 days since the low on January 22, Bitcoin has risen over 40% in price because many have jumped in hoping to grab a bargain. However, they may have jumped in too early given that last week it fell nearly 20% in price. Given this, anyone who bought into Bitcoin in recent times or who has been holding it since January 2021 has either lost or is barely breaking even.
From a technical perspective, Bitcoin is showing signs of further falls and I believe it will not be long before it breaks below the low at 29,455 in July 2021.
In fact, there is a good probability that Bitcoin will fall to around 20,000 or below. If this occurs, it means a fall of 45% from its current levels and around 70% from its all-time high. So buying into the recent dip could be an expensive exercise for those who jumped into Bitcoin hoping it would rise strongly.
The challenge with buying any assets when they dip is knowing whether the dip is just a short term down move, a more sustained correction or a crash like Bitcoin is experiencing, which as I mentioned is likely to continue. Too many times, I have seen traders buying in the dip only for them to be left bewildered as they watch their investment fall away considerably.
Right now, the best thing to do with Bitcoin is to sit back and wait for the right time to enter. Those who are patient will be handsomely rewarded when it eventually stops falling and starts to rise.
Written by Dale Gillham founder and chief analyst of Wealth Within