It may be difficult to buy Bitcoin at significantly higher prices than a few months ago. However, with the right strategies, you can buy Bitcoin during dips with a favorable risk-to-reward ratio while riding the bull market.
Confirming bull market conditions
Before collecting, make sure you’re still in a bull market. MVRV Z-Score Analyzing the deviation between market value and actual value helps identify overheated or undervalued positions.
Avoid buying when the Z-score reaches high values, such as above 6.00, which indicates that the market is overpriced and nearing a potential bearish reversal. If the Z-score is below this, a decline likely indicates opportunities, especially if other indicators are consistent. Do not accumulate aggressively during bear markets. Instead focus on finding the macro bottom line.
Short term holders
This chart shows the average cost basis of new market participants, offering a glimpse of short-term holder activity. Historically, during bull cycles, whenever price rebounds The price received by the short-term holder Line (or dips slightly below), it has presented excellent collecting opportunities.
Determining market sentiment
Although simple, the Fear and greed index Provides valuable insight into market sentiment. Scores of 25 or less often indicate excessive fear, often accompanied by irrational sell-offs. These moments offer favorable risk-to-reward conditions.
Spotting market overreaction
Funding rates Traders reflect sentiment in futures markets. Negative funding during bull cycles is especially telling. Exchanges like ByBit, which attract retail investors, point out that negative rates are a strong signal to rally during dips.
When traders use BTC as collateral, negative rates often indicate excellent buying opportunities, as those shorting Bitcoin are more cautious and deliberate. This is why I prefer to focus on coin-denominated funding rates as opposed to regular USD rates.
Active address sense indicator
This tool measures the difference between the price of Bitcoin and network activity, when we see divergence Active Address Sentiment Indicator (AASI) This shows how strong the underlying network usage is, given the steep drop in price.
My preferred method of use is to wait until the 28-day percentage change in price drops below the lower standard deviation band of the 28-day percentage change in active addresses and crosses back above. This buy signal confirms the strength of the network and often signals a reversal.
conclusion
Rallying during bull market declines involves managing risk rather than chasing bottoms. Buying slightly higher but in oversold conditions reduces the chance of experiencing a 20%-40% decline compared to buying during a sharp rally.
Confirm that we are still in a bull market and bearish for buying, then identify favorable buying zones using multiple metrics for convergence, such as short-term holding’s intrinsic value, fear and greed indices, funding rates, and AASI. Prefer small, incremental purchases (dollar-cost averaging) over going all-in and focus on risk-to-reward ratio rather than absolute dollar amount.
By combining these strategies, you can make informed decisions and take advantage of the unique opportunities presented by bull market dips. For a more in-depth look into this topic, check out a recent YouTube video here: How to Collect Bitcoin Bull Market Dips
For more detailed Bitcoin analysis and to access advanced features like live charts, personalized indicator alerts, and in-depth industry reports, check out Bitcoin Magazine Pro.
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.
