Original title: Why you shouldnt buy the dip
Original author: wale.moca ( @waleswoosh )
Compiled by: Asher ( @Asher_0210 )
Mainstream coins are in a downward trend, and the most dazzling winner of this cycle, Memecoin, has almost completely given back the gains during the entire bull market.
In such a market environment, social media is full of voices saying now is a good time to buy at the bottom, and many people think this is a rare buying opportunity. However, the general consensus of the market is often unreliable and may even become a reverse signal. No one can accurately judge the bottom of the market, but if everyone is advocating buying at the bottom, then maybe we should stand from another perspective and re-examine the current market environment.
So, in this post, I want to take the opposite stance and explore four reasons why you might not be buying the dip right now.
1. “Undervaluation” does not exist
Many Memecoin secondary prices are now even lower than they were before the Memecoin supercycle began. For example, the price of WIF has fallen back to early 2024, when the Memecoin craze had not really started. For many investors who experienced the first crypto cycle, they might think: This coin has fallen 95% from its all-time high (ATH), it must be super valuable now.
This is easy to understand, because I had a similar experience in 2022. At that time, I was not focusing on Memecoin, but NFT-Bored Apes is down 60%, isnt this a buying opportunity? But the reality is that after falling 60%, it has fallen another 80%, and BAYCs floor price has shrunk another 75% since the beginning of 2023. Remember, BAYC is still one of the top three projects in the NFT field, and for most small-cap assets, the decline is even more terrible.
Just because an asset has dropped 90% doesn’t mean it’s “undervalued”, it’s likely just coming down from a highly inflated bubble valuation. If a Memecoin was once worth $1 billion and is now worth only $50 million, you might think it’s “cheap”. But the fact is, a $50 million valuation is still likely well above its true value.
Trying to trade these cheap-looking falling assets is often the fastest way to lose money. I know many friends who smartly sold at the top of NFTs in 2022, but lost a lot of money in the subsequent decline. Because they are still influenced by the psychological set during the bull market, thinking that these assets are worth buying if they fall too much, but they end up falling into deeper losses.
2. The bubble will slowly burst
Taking Memecoin as an example, we also need to consider the time period. Bubble bursting is often a long process, and Memecoin has obviously experienced a typical bubble market.
Even if an asset has retreated 90% from its high, it does not mean that it will bottom out immediately. In fact, the decline after the bubble burst usually does not end in a few weeks, but lasts for months or even years. The performance of the NFT market after 2022 is a typical case - the price did not rebound quickly, but experienced a long period of decline and liquidity depletion.
If you continue to buy at the bottom in the downward trend after the bubble bursts, or stubbornly hold on, your funds will often not return to zero quickly, but will be slowly consumed by the market. This is a typical feature after the bubble bursts - it will not give people the pain of returning to zero overnight, but like boiling a frog in warm water, your position will continue to shrink until you have to admit the loss and leave.
3. There will be no rebound without a crazy narrative
The same applies to mainstream coins - the market needs an extremely bullish narrative to support price increases. For example, the previous Strategic Bitcoin Reserve narrative, the markets optimistic expectation at the time was that the US government would not only hold Bitcoin, but also use taxpayers funds to actively buy it, which then triggered global governments to follow suit, and eventually pushed the BTC price above one million US dollars. But the reality is not as radical as people expected. The event itself is still positive, but because the markets original expectations were too high, the final market reaction was far less than expected.
Strategic Bitcoin Reserve Narrative Perspective
Memecoin has also experienced a similar narrative collapse. The market logic in the past was: Retail investors will buy like crazy and push the market value of Memecoin to tens of billions of dollars. But now, no one believes this story anymore. Once the market starts to question a narrative, the narrative will completely collapse and it will be difficult to recover.
NFTs follow the same pattern. In 2022, the popular narrative in the market was: NFTs are not only part of the crypto industry, but will completely change the world in a short period of time. But when this belief was broken, market sentiment quickly cooled. Today, there are still many excellent NFT teams continuing to build, but the market no longer believes in the crazy expectations of these NFTs will be worth millions of dollars in the future. When the narrative is no longer crazy, the market will no longer see irrational fanatic rebounds.
4. The psychological trap of “I will definitely sell next time”
Many people have experienced the cycle of surge-surge-rebound-surge again of assets, but ultimately failed to sell at the high point. The biggest psychological impact of this experience is a strong sense of regret. If you have also missed the high point, you may secretly make up your mind: Next time the price rises to this level, I will definitely sell! But it is this mentality that makes it more difficult for the market to rebound.
When a large number of investors hold the idea of selling as soon as the price goes up, the market will form a continuous selling pressure, resulting in:
Any minor rebound will be met with heavy sell orders, inhibiting further gains;
It is difficult for prices to return to past highs.
The market needs fanatical belief to drive prices up, rather than the short-sighted mentality of Ill run away if it goes up this time. Otherwise, its just a game of passing the parcel, and there will always be someone who gives up earlier than you, making it difficult for prices to really rise.
Is the market completely screwed?
After reading the previous analysis, you may feel pessimistic, but this is not the case. New market narratives will always emerge, the key is to wait for the right time.
When speculators and trapped funds are completely cleared out, the market regains faith and gives birth to new narratives, that is the real opportunity to buy at the bottom. Have we reached this stage? Maybe, maybe not - no one can be sure.
But one thing is for sure: 99.99% of Memecoins are not worth buying even if they drop another 90% because their narratives have collapsed; while the fundamentals of BTC and mainstream coins are stronger than ever, and the long-term trend is still upward. If you buy BTC today, you may have a good return in the long run.
