The crypto market lost more than $500 billion after this drop. Bitcoin prices have been falling steadily for the last week. Like with any crash, there have been the expected calls of ‘buy the dip’ from investors who believe that the dips are only temporary and that the digital asset will soon recover all of its lost value.
This advice may sound sometimes, but there are many drawbacks. These could include adding to losses that end up losing more and investing more in projects that might already be failing. Veteran trader Peter Brandt has addressed these calls of ‘buy the dip’, explaining why investors should not follow it.
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There are more ways to lose money
Peter Brandt, the famous trader, responded to Jeff Ross (CEO of Vailshire Capital), tweeting that the bitcoin price drop presented an opportunity for traders to grow their portfolios. Brandt’s tweet was vehemently against this school of thought, proposing instead “a sacred trading rule” for investors during times like these.
A veteran trader likened the bitcoin movement to the 1980 Silver $SI_F, where it had reached its top of $50 after a large run. People bought it hoping to catch the dip but, in reality, the price had fallen to $3.65.
I remember in 1980 people saying the same thing about Silver $SI_F after it topped at $50
It then sank to a low of $3.65 and did not start back up for 24 years
Not saying $BTC is the same, but a sacred trading rule I have used is never add to a losing trade
— Peter Brandt (@PeterLBrandt) January 7, 2022
The investor advised investors not to rush to buy bitcoin as it was low and that it would not fall further.
BTC's downward trend continues | Source: BTCUSD on TradingView.com
Compare Bitcoin And Gold
The next section will describe the process. tweetBrandt made a similar analogy to bitcoin’s price. He shifted his focus to gold this time, noting that gold had experienced the same trend as silver back in 1980s.
His explanation was that in 1980 gold hit an all-time peak of $873, and then dropped to $2255. This asset, which was the preferred inflation hedge for decades, remained at this level for nearly three decades and only just beat that previous high in 1997.
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Brandt admonished the author of the previous tweet by asking, “Is this your definition of a ‘long-term’ investor?”
Naturally, Brandt’s comment regarding bitcoin had drawn the ire of bitcoin maximalists who flocked to explain to the older trader why the digital asset would not follow the footsteps of gold and silver.
One user tweeted that “Difference is btc is technology, not a rock”, while another pointed out that bitcoin had more utility, saying, “Gold has been a disastrous investment. It has very little utility. In the event of a political collapse or an economic crash, it is hard to take your gold. Hence #Bitcoin.”
Featured Image from Blogtienao. Chart by TradingView.com