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BTCUSD: Technical correction ending for renewed uptrend

Updated

The correction in Bitcoin and other markets on September 7 was a purely technical correction after completing a five-wave sequence of advance since the c. 29000 lows in July. Bitcoin market internals, such on-chain activity, whales sales, show no indications of fundamental bearish signals.

The correction is a perfect, text-book example of the Elliott Wave Principle. After five waves up, comes a correction of three waves down. In this case the correction took the shape of a so-called double-three, a combination correction consisting of an ABC flat, and a triangle correction pattern, formed in an WXY pattern, as shown in the chart. This is a very common pattern in second waves.

At this time, only the E-wave, e, of the triangle has to be completed, after which a five-wave sequence to the upside should emerge for continuation of the bull market trend.

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PS: correction: encircled A, B, C labels within wave (X) should be lower-case letters for correct relative wave degree.

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So, overnight sellers managed to take prices down a notch following the end of the triangle formation, after prices started advancing to the upside. This invalidated the triangle as a final count, which now looks just like a flat in the second position of the double-three.
In comparison to Ethereum, BTC has been quite robust in this, taking down ETHBTC proportionally, until it recovered in the morning hours. Whales have been on a buying spree, per reports.

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Since the last update, the market formed a larger potential triangle formation that again has the potential to provide the endpoint of the correction with its e-wave.
Confirmation should come from a break over the upper trend line.

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PS: The A,B, C of e are indicated only as a reminder that e has to have three waves, as all of the legs of the triangle. That is probably not yet fulfilled. Given the snail speed of the market right now (I think it was Mandelbrot who called it time distortion), this can take a while.

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The market showed the expect behavior of a triangle overnight, but the last wave inside the triangle was not clearly a three, at least not on the scale of the other legs. The same appeared in ETHUSD, btw, where the entire triangle looks a little too sharp, too converging. It also broke to the upside. Perhaps this is still wave d.
In ETH this places the trend line almost perfectly parallel to the lower one.

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The market has continued to trade inside the triangle, but yesterday's erratic up and down spikes raised the top trend line to close to 47,000, to a position essentially parallel to the bottom line, just like it has been for ETHUSD already. Prices then dropped below the bottom trend line, which is not unusual if this was indeed the e-wave of the triangle, to begin a slow rise to the top of the triangle again in a five-wave sequence, where the move has so far been reject from breaking significantly above the line. The same applies for ETHUSD, where the rise stopped exactly at the trend line. The rest of the day will show whether this is an impulse for exiting the correction. Technically, the corrective structure of an WXY is complete, but we know that horizontal (more or less) corrections can extend easily.

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BTC has been pushing above 47,000, even 47.2k so far, and looking for much more. After an impressive ascend of about 4000 points in the last thirty hours or so, pressure is building for a breakout above the correction area.

It has been reported that Whales have been accumulating large amounts of spot during this correction, including Microstrategy, with a buy of over 5000 additional coins.

Ethereum has also clearly moved above its trend line for a breakout.

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Final confirmation of the end of correction should come from ascending above the top line of our green zone (see last chart) that provided support previously.

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Bitcoin has recaptured previous support levels and critical moving averages, while still in the general area of correction--but since that started exactly at the top, only a new top can escape it. But bullish tendencies are evident, and spot reserves continue their downtrend on the exchanges. 30k to 40k coins are being held closely, and mean coin age makes highs. Miners are not selling either.
The market is finding itself in an upward pointing compression wedge, that seems bound to be broken to the upside. I don't think it is an Elliott Wave structure. but shows perhaps interesting structural R/S lines.
This is just a working chart with an attempt of some wave assignments of recent trends. I have assigned a 1-2-3-4 sequence at the market end, but the fifth wave does not feel bullish at all, so something else may be developing there.

I am also not sure how to treat the Walmart hickup on the 13th, in terms of EWP. I am almost inclined to just ignore it. News artifacts are not Elliott features.

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So, after two weeks of the bear's correcting BTC's achievements of late summer, we may finally be at the end of it. This is the situation I see in terms of wave structure of the correction.

The correction low was finally printed on the 21st of September, and the market has spent another week building the initial first wave of a new uptrend, and correcting the same to near its beginnings. This is the character of a typical wave 2, the bear's think they are in charge, and the market will go lower yet, and the bulls are in despair because they entered prematurely in wave 1.

Technically, the recommendation by Elliott Wave traders has been that a bull market is not confirmed until prices exceed the first wave, and we are certainly not even close to that yet. At best we are at the bottom of wave 2.

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Finally we get a leg that exceeds its prior high... go bulls. They are flirting with 3000, but really need 3200 to get out of the shadows.

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Haven't been updating this in a while...

BTCUSD is making another run at breaking 50,000, this time for good or for a while on its way to a new ATH.

Here is the recent action, just short of 50,000.

From the bottom of the last major correction, show in the previous chart, BTC has printed a nice 5-wave rally, currently still trading in the fifth wave of that.
A rough target for this is about 50.2k for the first reasonable Fib projection of 1.618. More is of course possible, much less not, because we are almost there.

BTC is just struggling to break that psycho number 50k, having achieved 49.2 on an earlier run today.

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Overnight, BTCUSD finally scraped through that 50k barrier, climbing along a newly minced trend channel, as shown in this new chart.
Along the way it reached the hypothetical third wave target of about 50.2k at the 1.618 multiple, discussed previously. Nothing requires it to stop here, in fact the newly printed progressions suggest an upside to perhaps 52.8k.

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Bitcoin is showing good strength. It seems to have decoupled somewhat from other risk assets, to which it once was grouped. With the stock market weak, and the dollar strong, BTCUSD is nevertheless pushing higher. The dollar may be topping out here, and a pullback would provide more easy upside for the coin, allowing it to accelerate into the upper 50s, and probably printing a new all time high by the end of the month. In any case, October fest promises volatility.

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Many bullish signs for Bitcoin on the board. Miners have been selling only at a minimal rate, mostly accumulating. Chinese miners have been relocating and the hash rate has been growing steadily. Whales have been accumulating for LTH and the mean coin age has been rising. On-chain analysis shows no signs of bearishness, quite the opposite. Spot is in a squeeze at the exchanges. All this can only lead to higher prices, and the bear trap should soon be obvious to even them.
The chart is clear, and the weekly close showed a bullish engulfing candle, usually a very bullish signal. The political climate for BTC seems favorable, with nations adopting it as a currency, and the Western economies taking the opposite approach to China.

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BTCUSD 51,000

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BTCUSD 51,500

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The rally has carried BTC just short of 52,000 for the day, almost exactly a 2000 point gain since yesterday's closing. From yesterday's lows it is a rally of 5000 points, more than 10% in one day. That's the definition of volatility in crypto. If it dropped that much not many would shed a tear--been there done that--whereas it would be the apocalypse in equities.

The structure of this rise is quite interesting, and as usual quite deceiving. I too was suspicious that the initial impulse from yesterday's low (labeled ((C))/iv at 46900, was not actually a fake-out, a B-wave to be reversed immediately in a larger triangle. But it looked like a five-wave sequence, and was corrected by three waves down, ABC. for a good looking 1/2 sequence. Shortly thereafter, however, another one appeared, another 1/2, with a long tail sloping upward to form a peak at over 50300. Another 1/2 ? They looked like they could be the same wave degree. It didn't occur to me until later that this probably should be labeled as a leading diagonal (blue trendlines) to form just a single wave one.
The interesting and deceiving part is that the first, third, and fifth waves of the diagonal had a five-wave structure, the diagonal was a 5-3-5-3-5 just like a normal impulse, and not the standard 3-3-3-3-3 structure of other diagonals. This is a special version that only occurs as a leading diagonal in a first wave (1 or A), acc. to Prechter and Frost, who discovered it, I believe.
This assignment cleared up a lot of potential complexity.
I am still not 100% clear on the assignment for the rally thereafter, to the present high at 51915, but it could be a completed 5-wave sequence, and its correction to make another 1-2 start, or perhaps a 3-4 for a pair of waves at the bottom.
Judge for yourselves, I am looking for clues from the market in the near future.

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BTCUSD 55,500

Why am I not surprised?

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Correction: 55,499.96

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This impulse in wave three topped just $400 short of the 2.618 multiple projection of wave one past the large September correction. This would make it an ideal top of wave three and we might expect a wave four correction at this time. But third waves can run long and hard. The 3.0x multiple is at 58.8k, the 3.618 at 63.8k. Those extensions are not impossible at this point.

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This rally is not finished.
In this chart I have indicated the current wave count for the last day or so.
It clearly indicated that only three impulse waves up are complete, with a fourth wave correction underway. The fifth wave will take it to new highs.

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Ah, fifth wave might already be underway. unless this develops into a larger corrective pattern. So far, it has been a simple A-B-C.

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I see a report that states that someone bought 1.6 billion USD worth of BTC via market orders in a period of five minutes.
Cryptopotato also reports that during one hour $145 million worth of shorts were liquidated.

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I think this correction in subwave four is unfolding as an A-B-C with a triangle in wave B.

It has been deceptive, with a three-wave down for the A. The leg up was the lead-in wave a of the triangle.

Right now it is dropping into wave d, and we might see a quick wave e back up, before a larger drop into wave C to finish the correction.

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Wave E is already forming:

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Wave c could easily drop a thousand points.

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or more. It could go below wave a.

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The alternative is that it is already a correction in the new wave 2 of 5, but a wave 2 should not be a standalone triangle.

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clarity will arrive...

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up or down? 50:50, the wave count is 100% ambiguous. I like the straight trend line (up) of the leg, and ETH seems to support a move up.

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Looking at the daily chart, the 3.618 Fib multiple of wave 1 (started at 39.6k) might place the end of this third wave within $100 of the ATH. Seems like a logical target for Octoberfest.

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BTC is advancing in small waves, which have recaptured the existing trend channel perfectly, crawling up along one of the Fib lines.

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Here is the trend line crawl. Usually these things end up in a sudden explosion, when the oscillations die down. They are a kind of sideways correction in a strong uptrend, and on a larger time scale look like some hash in the middle of a spike.

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I think the new high during the night was actually already the fifth wave that was still missing yesterday. Until this morning I thought it was just the B-wave of the correction making a new high and I had worked out a fitting wave count, perfect I thought. But since the downtrend has been continuing with a newer low, I have concluded that the fifth is in, as well as the fifth of one larger degree, and wave three of the "genesis" wave 1 past the September correction. Assuming this being wave (iv) now, we have to realize that it could easily drop down to below 50k. The 38.2% retracement level is just below that mark. The market could also continue sideways for correction, and print a super-large bull flag, before launching into the next fifth, which should carry it to the ATH.

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This conclusion is also supported by the Fibonacci levels from wave 1. I had projected the first target at 1.618 or about 50.2k. The market actually stopped about a hundred dollars past the 2.414 multiple, a decent size for any third wave.

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Here is the chart:

(somewhat cluttered)

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The fourth wave (iv) is still in progress, I think. Since the last update, BTCUSD actually moved higher than the (iii) peak, creating an orthodox top. If that was indeed a B-wave, then the C-wave seems to be in progress, which can take the market down a bit again.

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The fourth wave probably ended overnight at about 53674 or so, it was just a candlewick down. I think the market is ready for another attempt at 57 or 58 kilodollars. That correction was very shallow, but wide. I'll take that combo as a bullish sign.

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That low was actually in the evening EDT, not during the night.
ETHUSD seems situated in a similar bullish position and is looking up right now at 3625.

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Since the market has refused to go either way in any significant manner, and instead kept oscillating sideways, I finally realized that this is probably a triangle correction, as shown in this new chart.

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LOL, and as soon as I suggest this, the market spikes up and out of the "triangle". ... 55700.

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But we are getting somewhere... 56,000

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This spike was quickly reversed, which provides another clue. The market is probably indeed in a triangle correction, but it is larger than proposed. I had a smaller one in mind as well, but the trend lines converged too quickly.
A better interpretation is the following. This means the minor wave four--I have it labeled ((4))--is till not finished. The triangle is a running triangle with a top of wave B higher than the preceding wave three. I have the triangle marked with large capital letters for emphasis. (some smaller degree waves are still not corrected for proper count of this, it is the triangle alone I want to focus on.
If this is correct, then wave E is in progress or even nearly finished, which means we might expect a move beyond 56k soon.

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I like this the best so far, because the size of wave 4 seemed too small for the corresponding wave 1/2 sequence at the bottom of this entire run since the September lows.

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The roughly horizontal trading now has filled the entire trend channel of the last two weeks, reaching the lower line. It is time to move upward again, just like it happened a week ago.

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We finally saw some action today, the market broke the triangle to the upside, over 56,500, and then immediately reversed to near the bottom of the triangle.
I think this confirms the function of the triangle. It was a correction of wave ((4)) as indicated in the last chart. This is not the major wave of the trend, just the last subwave. BTC broke to the upside to complete that sequence with wave ((5)), and then corrected down. I am not convinced that the correction is finished, but it could be, making this just a flat. It could still develop into a larger zig-zag.
However, a guide line in EWP is that corrections in waves 4 and 2 most likely go as deep as the fourth wave of lesser degree, which would be the bottom of this triangle.

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This correction is being retraced pretty aggressively, and managed already over a thousand points of retrace to the 50% Fib level. Past the 61.8% level (55.7k) it might become more probably that it is in fact not just a retrace, but an actual bullish move up.

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The 61.8% retrace level was fought hard by the bears, but the bulls moved past it eventually and managed to take the market to a new high above 57,000, albeit only briefly before sending it back to retest the 56k level in an a-b-c retrace, so far.
It may take a couple attempts to penetrate into the resistance zone higher, and build a base there for an assault on the ATH.

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Looking at yesterday's action the morning after, I can actually see two possible explanations/wave counts of the volatility. The upper trend line of the triangle was by no means fixed previously and can be moved to include the action last night for a perfectly reasonable structure. The difference is the inclusion/exclusion of the fifth wave that follows the triangle as wave four. A chart would be good at this point, I suppose...
In any case, in terms of traditional TA, this whole formation is a perfect bull flag, and we should expect the market to behave accordingly in the weeks coming. October fest only started its second week.

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Here is a chart that indicates the alternative assignment in purple.

The overall wave count becomes ever more complicated for this entire bull leg, from the September lows up. Marking wave ((5)) as completed make it only a little simpler.

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57.9k or just ahead of 58.0 is the arithmetic 78.6% Fib retracement level of the May/June correction, that many bears likely still hang on for hope of redemption and a major bear market. Market has printed 57,400 so far.

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Of course there is historical resistance here too. 58.8k was the highest monthly close of all time for Bitcoin/USD.

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These are perfect Elliott Waves right now...
Third wave of smallest degree (Minuscule) found 1.618 limit of 1 at 57,449.
Third wave of one larger degree has 1.618 Fib target at 60.4k.

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Got the number wrong for the 78.6% Fib level, it is actually 57.1k. Somehow the marker must have got shifted. The market is past that level already and it is now the bottom line of a new green zone, a new support zone, that the market is forming in the lower half of the 57000s.

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Further updates along these lines will be posted on a new topic:

BTCUSD: Elliott Wave Structure of October 2021 Rally

unbeldi

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