To catch a falling knife in crypto trading means to buy a cryptocurrency that is in the midst of a steep and rapid price decline.
The idea is to buy the cryptocurrency at a lower price, in the hopes that the price will eventually rebound and that the trader will be able to sell it for a profit.
Catching a falling knife is considered to be a high-risk strategy because the price of the cryptocurrency could very well continue to fall, resulting in a loss for the trader. It requires a lot of skill and discipline to successfully catch a falling knife, as it can be difficult to determine when the price of the cryptocurrency has reached a bottom and is likely to start recovering.
So, in Cryptospeak:
Catching a falling knife means trying to BTFD, while the dip itself hasn’t finished yet, or might never finish and a token price keeps on tanking. You might cut yourself in spectacular fashion, financially speaking.
So, while buying a dip could be a way to DCA in and lower the average cost of your token, it might be the start of a real crash, it might be a rug or a black swan event might cause a much further drop.
See also bagholders.
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