Bitcoin dropped 2% then rebounded after Trump said he's 'a big crypto guy' — here are experts takes on buying the dip

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On July 6, Bitcoin dropped more than 2% after Strategy — a corporate buyer of Bitcoin — disclosed in a regulatory filing (1) that it had sold about $216 million worth of the cryptocurrency.

That's the second time this year the company has sold some of its Bitcoin reserves — a complete reversal of its former "never sell" approach. Strategy posted a $12.54 billion net loss (2) in the first quarter of this year as the price of Bitcoin slumped.

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Later that day, Bitcoin rebounded 1.8% (3) after President Donald Trump said that he's "become a big crypto guy" when responding to a reporter's question about whether Bitcoin might be included in Trump Accounts (4) — the tax-advantaged 503A accounts that launched over the July 4th holiday weekend.

The crypto market is notoriously volatile and hyper-sensitive to news cycles, from world events to regulatory shifts to viral tweets. Sometimes that volatility is short-lived; other times it's a sign of a coming slump.

"Unlike stocks, for example, cryptocurrencies have no cash flow and do not have the ability to pay dividends," according to Fidelity Viewpoints (5). "And unlike commodities (like gold and copper), they have no industrial use."

Cryptocurrency is a type of digital currency that's used for secure financial transactions. It's not issued by governments or central banks; rather, it operates on blockchain technology and trades on cryptocurrency exchanges.

While Bitcoin is the most common form of crypto (it's been around since 2009), there are many others, including Ethereum, Litecoin and Ripple.

Buying the dip means buying crypto after its price temporarily drops. The risk lies in how long the dip lasts — after all, you don't want that dip to turn into a crash.

Over the past 12 months, Bitcoin's price changed -45.3% (6). Today, it's sitting around $65,000, while in October it was $125,000.

For investors who already own crypto, the question is whether to hold, add to their portfolio or exit the market. For potential investors, the question is whether to buy the dip.

Buying the dip requires an understanding of market conditions and a high tolerance for risk — and perhaps a bit of luck. Dips might simply be a short-term fluctuation based on the news cycle — like Strategy selling Bitcoin reserves — or it could be an indication of a prolonged bear market.

A dip typically occurs in a healthy market. A crash can occur when market fundamentals aren't stable. Knowing the difference can help you make smarter decisions, but there's no guarantee either way. If you're buying the dip, you have to be willing to take on a significant amount of risk.

Richard Smith, CEO of RiskSmith, told CNBC (7) Select that if you're investing in crypto, you should have a mindset of holding for five to 10 years.