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The dog-themed cryptocurrency Shiba Inu skyrocketed by more than 26 percent in a single day this week, part of a big stock-market spike after an ominous January, and investors keep buying. This begs the question, are they buying the top of the stock market bubble?
Investors who buy near the top of the bubble could see their profits disappear completely because no one knows where the top is and the bubble could burst at any time.
Retail investors are continuing to buy the dip, and they’re not alone. Institutional investors are doing the same, according to a Bank of America report.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
An institutional investor is an entity such as a hedge fund, mutual fund, and endowment that pools money to purchase securities, real property, and other investment assets. A retail investor is an individual, non-professional investor who buys and sells securities or funds that contain a basket of securities such as mutual funds and exchange-traded funds.
“Buying the dip” is a common phrase investors and traders use after an asset has declined in price in the short term. When investors buy an asset after a price drop, they hope to profit if the market rebounds.
Buying the dip can be profitable, but it can also be risky.
Assets that have fallen in price can still drop even more. If this happens, you might not see profits on the investments for years, The Balance reported.
The Bank of America report notes that single-stock equities saw inflows for the second time in three weeks, meaning investors are gambling, according to Bloomberg.
“After a tough markdown of stocks in January, some investors have shown interest in buying the dip,” wrote Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, in a note. “While such moves have worked well for most of this business cycle, we think it’s too soon to go all in.”
“The same retail investors who have been mocked are showing how to navigate volatility.. early days but growing equity culture will be a prominent theme of this decade,” tweeted Gurmeet Chadha, co-founder and CEO private investment group Complete Circle Capital.
Image: iStock
