The age-old controversy, the quandary of purchasing vs HODLing, and the latest price correction were just a few of the many dips in 2020’s prolonged bull run. Nebraskan Gooner, the inventor of Elevatetrading, recently tweeted about the drop. His argument is that over 90% of crypto Twitter users who ask traders if they purchased the dip are definitely the same people who told everyone to buy Bitcoin at $60000.
Bitcoin is now trading at $50000, and buying the dip as a strategy hasn’t worked out as well as most traders anticipated during the recent bull run; the market capitalisation was completely wiped out in 2017. It’s a traditional strategy used by businesses and has evolved into a trend. Grayscale’s institutional purchase data from bybt.com demonstrates that institutions like Grayscale are buying the dip.
In the majority of situations, short sellers have used futures markets to buy the dip. At the current price stage, the valuation of Bitcoin futures is $114 billion, with Bitcoin at $50000.
Bitcoin futures chart || Source: Skew
The largest amount in Bitcoin futures was seen on April 18, when it surpassed $150 billion. Despite the numbers on the chart, the futures market is currently dominated by short sellers. In the emerging Bitcoin futures market, there are five times as many short sellers as long sellers. Buying the dip is therefore not a tactic that has better returns across the dip.
Concentration by HODLers and short-term ROI are two metrics that provide insight into altcoin success in both situations, buying the dip vs HODLing. After the price collapse, the top altcoins, ETH, XRP, LTC, ADA, and LINK, have regained nearly 10% of their losses. The concentration of HODLers hasn’t increased drastically, implying that HODLers haven’t added to their holdings or even sold since the dip. This is a positive indication for altcoins, since there is potential for a market rally after the correction.
Provided that it lasted through Friday and finished just before the weekend, the recent drop has appeared as a genuine liquidity run. Selling is common before a market rally, and the buy the dip narrative is overused, but not in the case of ETH. According to Glassnode numbers, ETH transaction volume has reached a three-year high following the price drop and correction.
ETH Transaction Volume || Source: Twitter
When it comes to retaining trader confidence and attracting investment, ETH has emerged as the leading altcoin. The fact that trading rate increased after the dip validates the narrative that ETH traders may have purchased the dip. Buying the dip may have behaved better for top alts than it did for BTC.