Two Preconditions for Buying the Dip

Financial markets have been volatile in recent days, with sharp drops in both the Korean and US stock markets. Dan Bin, a well-known market commentator, recently made some remarks that sparked discussion about buying opportunities during major downturns. He said: 'When there's a big drop, you must be brave enough to buy. I've just used up the rest of my bullets.' This echoes Warren Buffett's advice to be greedy when others are fearful.

Dan Bin's statements were widely shared, but a closer look reveals two necessary conditions for buying during a major drop. First, investors must truly understand the asset and have a fair estimate of its value in mind. Second, the post-drop price must be worth buying.

Retail investors often rush to buy assets without evaluating their intrinsic value or considering risk. They may be swayed by labels like 'hot' or 'a trend.' In contrast, experienced investors assess an asset's value and handle risk effectively.

In the crypto market, Bitcoin has fallen from $120,000 to around $60,000, while Ethereum dropped from nearly $5,000 to below $2,000. The author is more optimistic about Ethereum at current prices and would consider buying it over Bitcoin.