Buying Bitcoin at much higher prices than just a few months ago can be daunting. However, with the right strategies, you can buy bitcoins during dips with a favorable risk-reward ratio while riding a bull market.
Confirmation of bull market conditions
Before accumulating, make sure you are still in a bull market. MVRV Z score It 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, indicating that the market is overbought and approaching a potential bearish retracement. If the Z-score is lower than this, the dips are likely to indicate opportunities, especially if other indicators are aligned. Do not accumulate heavily during a bear market. Focus on finding the bottom of the macro instead.
Short term holders
This chart reflects the average cost of new market entrants and provides a glimpse into the activity of short holders. Historically, during bullish cycles, whenever the price went back up The actual price of the short-term holder The line (or slightly below it) offers excellent opportunities for accumulation.
Measuring market sentiment
Although simple, Fear and greed index Provides valuable insight into market sentiment. Scores of 25 or less often indicate extreme fear, often accompanied by irrational selling. These moments offer optimal risk-to-reward conditions.
Observe the overreaction of the market
Financing rates It reflects the sentiments of traders in futures markets. Negative financing during bullish cycles is particularly telling. Exchanges like Bybit, which attract retail investors, show that negative rates are a strong signal to accumulate during downturns.
When traders use Bitcoin as collateral, negative rates often represent great buying opportunities because those shorting Bitcoin are more cautious and deliberate. This is why I prefer to focus on coin financing rates rather than regular USD rates.
Active address sentiment indicator
This tool measures the divergence between Bitcoin price and network activity when we see divergence. Active Address Sentiment Indicator (AASI) This indicates that the price is too bearish due to the power of the underlying network.
My preferred method to use is to wait for the 28-day percentage change to drop below the standard deviation band below the 28-day percentage change in active addresses and then move back up. This signal confirms the strength of the network and often signals a reversal.
conclusion
Accumulating during bull market dips involves managing risk rather than chasing down. Buying slightly higher but in oversold conditions reduces the probability of a 20-40% drop compared to buying during a strong rally.
Confirm that we are still in a bullish market and the bearish ones are for buying, then identify favorable buying areas using multiple criteria for confluences, such as short-term real bearer price, fear and greed index, cap rates and AASI. Prioritize small, incremental (dollar cost averaging) purchases over all-in, 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 presented by the bullish market. For a more in-depth look at this, check out a recent YouTube video here: How to sum up the declines in the Bitcoin market?
Check out for more detailed Bitcoin analysis and access to advanced features like live charts, personalized indicator alerts and in-depth industry reports. Bitcoin professional magazine.
Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Always do your research before making any investment decision.
