How to buy the proper dip of your favorite altcoin?
Buying the proper dip in crypto can be cumbersome because at the end of the day we don’t really know what’s gonna happen. In this article, I’m gonna tell you how to buy the dip so you don’t have to panic sell.
First thing first, you gotta remember the whole Crypto market revolves around BTC just as planets & moons revolve around Sun, so you need to analyze it’s movement before entering into your favorite altcoin, you need to take care of the following things before taking any positions.
Market Parameters:
There are a couple of market parameters that you need to keep an eye on it. These parameters are gonna affect in long run although they don’t react to short term fluctuations.
1. Total Crypto Market Cap:
The total market cap of crypto plays an important role in deciding the direction of the market sentiments. You can check the total market cap from coinmarketcap, From my analysis If the total market cap is greater than $1.4T then market sentiments are bullish, money is flowing into the crypto market from the real world. if it’s lower than $1.4T then market sentiments are bearish, the money is flowing out
from the crypto market to the real world These numbers are valid until BTC creates a new all-time high.
2. Market Sentiments:
Market sentiments are the outcome of the overall situation of the crypto market cap. There are several options to check market sentiments but the best and easy way to check it is by using the famous fear and greed index.
If the market is in extreme fear then it’s time to fill the bags with those stacks of fiat money, it has been seen that before any massive rally the market stays in the extreme fear mode for a few days sometimes a whole month, so you need to wait for those moments.
And alternatively, when the market is in extreme greed mode, FOMO starts to taking place then it’s probably time to sell. Before any market crash, the market stays in extreme greed for a couple of days.
3. Relative Strength Index (RSI)
When it comes to the determination of market sentiments, RSI indicator plays an important role. RSI is a simple but effective momentum indicator that gives us data about the current market situation. If the RSI is below 20 then it’s in an oversold zone that means sellers are exhausted and buyers are gonna take the control of the market anytime. So its the perfect time to buy the dip.
Always use daily time period when comes to using RSI. Because RSI is a lagging indicator that uses price to determine the market situation using it in lower timeframes such as 1Hr or 4Hr will give noisy results. Similarly, If it goes beyond 80 then it’s time to sell as buyers are exhausted now sellers are gonna control the market for a couple of days even a month.
4. BTC Dominance
BTC dominance is the ratio of the total market cap of bitcoin vs the total Crypto market cap, its value revolves around somewhere between 40–60%. When BTC dominance starts to increasing this means people are selling their alts and converting it to BTC so its better to sell the alts and move them into BTC. When BTC dominance starts to increase it is the best time to buy altcoins this means people are buying different altcoins with their existing BTC.
Conclusion:
Although these factors aren’t enough to determine the market situation but they’ll give you a slight edge over the crowd that’ll help you decide whether it’s the right time to buy or not. Having knowledge of technical analysis would be a plus point. Although if you are long-term hodler then you don’t need to be a genius in TA but you have to have a basic idea about Technical analysis. Such as using trendlines and support & resistances to make a perfect entry and exit strategy.