Buying Bitcoin at prices much higher than a few months ago can be daunting. However, with the right strategies, you can buy Bitcoin during dips with a favorable risk-reward ratio while riding a bull market.
Confirm bullish market conditions
Before accumulating, make sure you are still in a bull market. MVRV Z-score Helps identify overheated or undervalued conditions by analyzing the deviation between market value and realized value.
Avoid buying when the Z score reaches high values, such as above 6.00, which may indicate that the market is overextended and approaching a potential bearish reversal. If the Z-score is lower than this, dips likely represent opportunities, especially if other indicators are in line. Don’t accumulate aggressively during a bear market. Focus instead on finding the overall bottom.
Short term owners
This chart reflects the average cost basis of new market participants and provides a snapshot of short-term shareholder activity. Historically, during bull cycles, whenever the price bounces from a level The price achieved for the holder in the short term (or dips slightly below), it has provided excellent opportunities for accumulation.
Measure market sentiment
Although simple, Fear and Greed Index Provides valuable insight into market sentiment. Scores of 25 or lower often indicate intense fear, which often accompanies irrational selling. These moments provide favorable conditions for risk versus reward.
Detect market overreaction
Financing rates It reflects the sentiment of traders in the futures markets. Passive financing during bull cycles is particularly evident. Exchanges like Bybit, which attract retail investors, show that negative interest rates are a strong signal to accumulate during declines.
When traders use Bitcoin as collateral, negative rates often indicate excellent buying opportunities, as those who short sell Bitcoin tend to be more cautious and deliberate. This is why I prefer to focus on currency-denominated financing rates rather than regular dollar rates.
Active title sentiment indicator
This tool measures the difference between Bitcoin price and network activity, when we see a difference in… Active Address Sentiment Index (AASI) It indicates that there is excessively bearish price movement given how aggressively the underlying grid is being used.
My preferred method to use is to wait until the 28-day percentage change falls below the lower standard deviation band for the 28-day percentage change in active addresses and crosses back above. This buy signal confirms the strength of the network and often indicates a reversal.
conclusion
Accumulating during bull market declines involves managing risk rather than chasing bottoms. Buying at a slightly higher price but in oversold conditions reduces the probability of experiencing a 20%-40% pullback compared to buying during a sharp rise.
Confirm that we are still in a bull market and that the dips are for buying, then identify favorable buy areas using multiple metrics to converge, such as the realized price for short holders, the Fear and Greed Index, funding rates, and AASI. Prioritize small, incremental purchases (dollar cost averaging) over doing everything and focus on risk-reward ratios rather than absolute dollar amounts.
By combining these strategies, you can make informed decisions and take advantage of the unique opportunities provided by bull market declines. For a more in-depth look at this topic, watch a recent YouTube video here: How to collect dips in a Bitcoin bull market
For a more detailed analysis of Bitcoin and to access advanced features such as live charts, custom trend alerts, and in-depth industry reports, see Bitcoin Pro Magazine.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Always do your own research before making any investment decisions.