The Various Meanings of 'Dip' in Cryptocurrency

If you’re a crypto-trader, it’s likely that you’ve heard this word more than once in the past year. With so many new coins emerging and an ever-growing number of trading platforms, it’s important to understand what ‘dip’ means in crypto-speak – and how to respond appropriately when it happens to your investments.

Here are the various meanings of ‘dip’ in cryptocurrency and how to respond when you come across one of them.

How to Trade Crypto on Binance

If you’re looking to trade cryptocurrency, it’s a good idea to know what terms like dip mean. A dip is when a cryptocurrency, such as bitcoin or ether, drops below its highest price point and quickly bounces back.

Traders generally wait for dips before they buy large quantities of crypto. The dip can also be used as an opportunity to sell excess crypto at a higher price.

It may sound counterintuitive, but selling your coins right after they take a small dip can often result in higher profits than waiting for them to climb back up. If you want to make money by trading on Binance, it’s crucial that you understand these terms first.

If the Market Goes Down

Although it’s difficult to understand why cryptocurrency markets fluctuate so wildly, there are some reasons for market movements.

Large investors can manipulate prices by placing large buy or sell orders that briefly alter supply and demand before canceling them (known as shaking out weak hands). Some algorithms can react differently based on your available trading capital.

FUD — fear, uncertainty, and doubt — is a term used to describe negative news that causes crypto-prices to drop while PND — positive news (usually rumors) — causes a price hike. It’s also important to keep in mind that most dip only lasts a few days at most. Following trends and tracking cryptocurrency prices can help you make smarter decisions with your investments.

How to Buy Coins When There is a Dip

Cryptocurrencies have had a wild year. The market has gone up, way up, and then dipped before climbing to new heights again. Even if you've bought coins before, you might not know what it means when someone says there's been a dip.

Let's take a look at how cryptocurrency dips work and where it's headed next. There is no single price for Bitcoin, said Adam White, Vice President of Coinbase, one of the most popular platforms for buying Bitcoin and other cryptocurrencies online.

The price goes up and down depending on what exchange you use to buy them; most exchanges also charge fees on top of any current dip or rise in value. That can make things complicated for investors who may be exposed to different prices between different exchanges, he said.

How to Sell Coins When There is a Dip

Buy low, sell high. It's a fairly simple concept that has made a lot of people a lot of money. For example, if Bitcoin is trading at $9,000 and you think it will drop to $8,000 within a week or two, you can use that information to make money.

Rather than buy at $9k and hope it goes up before you have to sell again, why not buy coins when they're cheap? If they drop as expected, then you can quickly turn around and sell them at their new lower price—pocketing an easy profit.

This strategy is also known as dollar-cost averaging, which simply means buying smaller amounts more frequently rather than going all-in on one large order. Not sure how to take advantage during market dips?

What Does HODL Mean?

HODL is an acronym for hold on for dear life and refers to holding onto a cryptocurrency during a market crash or dip. It can also mean to hold in general, as in I'm going to HODL my Litecoin because I think it has value.

Hold on tight; it's possible that your cryptocurrency will come back up over time. If you need liquidity, you may need to cash out sooner than later, but if you're not fazed by volatility, HODLing could be your best bet.

More experienced investors know when a dip means buy-in-bulk time. This depends largely on their tolerance, but buying into a dip could mean waiting until things settle down again before reaping big rewards.

That said, there are no guarantees with cryptocurrencies—the markets are volatile enough without even adding dips into the mix! So keep calm and hold (or don't).

We just discussed what hold means. But what about those other terms? Well, let’s talk about them now:

Common Trading Terminology

A dip refers to a decline or a drop in value. Traders who sell coins and tokens often use sell-off or sell into strength as another phrase for a dip.

A sell-off is when a trader's position drops by 10 percent or more, whereas selling into strength simply means that one is buying at prices where other traders are willing to sell.

Dips can also refer to short-term decreases and increases in value that can be profitably traded within an hour or a day. These smaller dips offer fewer than ones with big potential losses but also less reward potential than if you'd been holding on to your coin for months.

If you aren't sure what these terms mean, no worries—we'll walk you through them below!

Conclusion

So what does ‘dip’ mean? It depends. Sometimes it means a short-term price decline; sometimes it means an intermediate price decline, and sometimes it even refers to a long-term price decline.

Confused yet?

If you are new to cryptocurrency, stick with my initial advice: Watch out for sharp spikes or drops that last less than 24 hours. That is a clear indication of manipulation, and it's something I try to avoid on a daily basis as an investor.

For those who have been around a while, however, dips can be more complicated. In most cases, I recommend using dips as buying opportunities rather than places to sell off your coins.

Again, timing is everything when it comes to dips—and if you miss out on one dip because you were too early or too late, don't fret! The market will correct itself eventually and there will be another dip for you to take advantage of down the road.