KEYTAKEAWAYS
- Low prices don’t always mean value—a 90% drop can signal a failing project rather than a bargain opportunity.
- Bubbles burst slowly, with multiple fake recoveries before prices stabilize or continue declining.
- DCA reduces risk by spreading investments over time, but choosing the right assets remains crucial.
- KEY TAKEAWAYS
- “LOW VALUATION” IS JUST AN ILLUSION—THE HIDDEN TRAP BEHIND IT
- BUBBLE BURSTS TAKE TIME
- WITHOUT A “SPECULATIVE NARRATIVE,” THE MARKET STRUGGLES TO RECOVER
- DCA STRATEGY: BALANCING THE RISKS AND OPPORTUNITIES OF BUYING THE DIP
- CONCLUSION: BE PATIENT AND WAIT FOR REAL OPPORTUNITIES
- DISCLAIMER
- WRITER’S INTRO
CONTENT
In the crypto market, “buying the dip” has become an almost automatic reaction. Whenever prices drop significantly, people say, “This is a great buying opportunity!” Social media platforms like X are full of similar opinions. But if you take a closer look, this strategy is not as simple as it seems. In fact, it can lead to even bigger losses.
“LOW VALUATION” IS JUST AN ILLUSION—THE HIDDEN TRAP BEHIND IT
Many investors fall into anchoring bias—the tendency to compare prices to previous highs. If an asset drops 90%, it may seem like a bargain. But this mindset ignores the asset’s actual value and the possibility that prices could fall even further.
Does a 90% Drop Mean the Asset is Undervalued?
A simple price drop does not always indicate a buying opportunity. A project’s fundamentals, future growth potential, and overall market sentiment must also be considered.
Case Studies: NFT and Memecoin Collapses
In April 2022, Bored Ape Yacht Club (BAYC) NFTs had a floor price of 144 ETH. By the end of the year, it had fallen to 60 ETH. Many thought this was the bottom, but the market continued to decline. By March 2024, the floor price was 20 ETH, down more than 85% from its peak.
A similar pattern occurred with memecoins. Dogecoin (DOGE) reached $0.73 in May 2021 before dropping to $0.05 in June 2022—a 93% loss. Many investors bought in at $0.2 or $0.1, assuming it was already cheap, only to watch prices decline further.
How to Evaluate Crypto Assets?
Traditional assets are valued based on earnings, cash flow, and business fundamentals. In crypto, especially for NFTs and memecoins, other factors must be considered:
- Use Case – Does the project solve a real problem? How many active users does it have?
- Revenue Model – Does it have a sustainable income source?
- Team Background – Does the team have a strong track record?
- Market Position – Does it have a competitive advantage?
Buying an asset just because its price has dropped can be a mistake.
BUBBLE BURSTS TAKE TIME
Market crashes do not happen overnight. The process can take months or even years. Prices often experience temporary recoveries (dead cat bounces), misleading investors into thinking the market is stabilizing.
Why Do Bubbles Take Time to Burst?
- Market Sentiment – It takes time for investors to realize that demand has disappeared.
- Liquidity Issues – During bear markets, trading volume drops, making recovery even harder.
- Narrative Collapse – Many crypto assets are driven by hype. Once belief in a project fades, demand declines.
Example: Bitcoin’s National Adoption Narrative
Bitcoin was once promoted as an asset that governments would adopt as part of their reserves. However, in reality, only a few small countries, such as El Salvador, have done so. The impact on the market was much smaller than expected.
In 2021, El Salvador adopted Bitcoin as legal tender, causing a brief price increase. But once investors saw that this did not lead to widespread adoption, confidence weakened, and Bitcoin prices fell again.
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WITHOUT A “SPECULATIVE NARRATIVE,” THE MARKET STRUGGLES TO RECOVER
Crypto bull runs are often driven by strong narratives that fuel investor excitement. Without a compelling new story, it is difficult for the market to regain momentum.
How Narrative Crashes Affect Markets
The 2020–2021 bull market was driven by several key narratives:
- Bitcoin as “digital gold”
- DeFi as a financial revolution
- Memecoins as cultural phenomena
When these narratives lose credibility, investor enthusiasm fades, and prices decline.Memecoins often rely on social media hype. In early 2023, the total market cap of memecoins exceeded $40 billion. However, as prices corrected, people began to question their fundamental value.When investors started asking why a token with no real utility was worth billions, demand dropped, and prices followed.
DCA STRATEGY: BALANCING THE RISKS AND OPPORTUNITIES OF BUYING THE DIP
Instead of blindly buying dips, a more balanced approach is Dollar-Cost Averaging (DCA). This means investing a fixed amount at regular intervals, reducing the risk of bad timing and market fluctuations.
Benefits of DCA
- Reduces Timing Risk – No need to predict the market bottom.
- Avoids Emotional Decisions – A structured approach helps avoid impulsive investments.
- Adapts to Market Conditions – More units are purchased when prices are low, fewer when prices are high.
DCA Traps to Avoid
Even with DCA, careful planning is necessary:
- Choose the Right Asset – DCA does not fix a poor investment choice. It is more effective for strong assets like Bitcoin and Ethereum rather than speculative tokens.
- Set a Proper Investment Schedule – Investing too frequently increases costs, while investing too rarely may miss opportunities.
- Adjust to Market Cycles – During clear bear markets, increasing investment amounts may be beneficial. In bull markets, reducing or even selling in increments (Dollar-Cost Selling, DCS) could be a better strategy.
CONCLUSION: BE PATIENT AND WAIT FOR REAL OPPORTUNITIES
This article does not suggest avoiding the crypto market altogether. In the long run, Bitcoin and Ethereum remain strong, and new technologies or narratives could trigger another bull cycle.
However, it is important to stay rational.
- Do not blindly follow social media hype.
- Do not try to predict exact market bottoms.
- Wait for real value opportunities instead of reacting to short-term price movements.
Cash remains a valuable asset. Investors who wait for the right moment are more likely to succeed in the long run.
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