Long

BTCUSD: Elliott Wave Structure of October 2021 Rally

Updated

Here is my current view of the wave structure of the rally since the September 2021 correction. That correction was either a second wave, or possibly a fourth wave, of the rally from the 29k bottom of the 2021 Spring "crash". The decision between 2nd and 4th depends on a definitive decision for the end of the correction from May to July. I believe most analysts use the July 20 low as the end of the correction, and count the September high as the top of the first wave. Accordingly, the current rally of October is a third wave, and should proceed in a powerful manner far beyond the all-time high of April. But this should hold true even for a fifth wave, in case that assignment needs to be made at some point with more data at hand.

The October Fest rally of 2021 actually started in September, like any good October Fest, with an initial first wave on 9/21 from c. 39,500 USD, Its second wave was completed on 9/28, in a dual peak formation, here counted as a flat A-B-C structure. There is some concern that it may actually be a sequence of two 1/2 pairs, but this cannot be decided just yet. We have to see whether an extra wave 3/4 combination can form in the near future, that cannot be accounted for any other way. For the present purpose and until better evidence, I am inclined to stick with my current count. In any event, this took the price higher only by about a thousand points to the low of wave two. From there on a five wave rally ensued for the third wave to a high of about 57,850 on Oct. 11, exceeding the high before the September correction. This third wave ended very near the 2.618 logarithmic Fibonacci extension of wave one, a very common size for third waves.

Since that high, a sharp and vicious fourth wave spiked downward to below 54,000. At this time we are waiting for confirmation of the end of this correction and the start of a new rally in the fifth wave of this bull market.

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BTCUSD is back in contention to make a new high, as it has been sighted above 57,000 again, after a strong rally of over 3000 points in just eight hours or so. Currently in a third wave of small degree, it should come close in the fifth wave.

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We are just waiting for the completion of this leg up in a fifth wave, before some pullback once again.
The market is at 57330 currently, past the 3.0 log. Fib extension of wave one in smallest degree since the correction, but still ahead of the 1.272 extension (57.6k) of the next largest wave one. I think other reasonable targets could be as high as 58.0 (1.414) or even 58.6k (1.618). This will complete wave 3 of the largest degree since correction.

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So, the 1.618 target for 58.6k was pretty close to where the market went. It reached a little over 58.5k. Good job, market. It is in the middle of the heavy resistance from not only chart history, but on-chain data. Considering, it has done rather well, but we should expect just a little more struggle, I would think. Prices will probably accelerate in the upper region from 60k.
Distribution has been light in the recent pullback to 54k, and the mean coin age has made new highs. The public has still to enter the market in significant FOMO-type fashion, since there is very little Crypto news or reporting in the media. A new ATH might wake them up. The miners are mostly accumulating, and the US has now become the largest base, since the Chinese have relocated their operations there and have restarted to mine coins. The hash rate has been increasing steadily. All very bullish signs for the rest of the year and probably some time into 2022.

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BTCUSD 60,000.

A milestone for this leg. The market is trading past the all-time high monthly closing price (58.8k), and is looking for more. The advance through 59k was less contested than I thought. Breaking 60k with a couple of attempts should set the market up for a challenge of the existing ATH.

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I believe the market is trading in a fifth wave since the recent low of 53.9k. Of this fifth wave, wave three produced the first 60k print (60,000 on Bitstamp, a little higher or lower on other exchanges), That followed a pullback this morning to support at 58.8k (the ATH monthly close). We have to see how much upside this fifth of fifth still has, and whether that's enough for a new ATH. Probably not before some correction, but it can always extend. The fifth wave started with a pair of waves that could easily be interpreted as two 1-2 sequences, promising a large leg up.

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BTCUSD 61,000.

Anticipation of an approval of a Bitcoin ETF may drive price before the actual event. Any sell-the-news effect will likely be limited and short-lived. The goal has to be the ATH at this point, and a correction after wave five is coming in any event.

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61,255 was the 1.618 extension of wave 1 in wave 5. Next target 2.000 = 62,350.

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BTCUSD 61.8+k: Valkyrie ETF Trust II approved by Nasdaq, supporting immediate acceleration of registration with the SEC.

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I was about to write that this fifth wave is far from finished. ... POP

62,950

It should run to the ATH.
The subwaves are still unfinished.

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Well, perhaps a little more correction is needed... The wave count may not be so clear after all.

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If BTCUSD can maintain a price of over 60,000--actually 21 dollars less--it will have established a new all-time high weekly closing price. The previous mark was set on April 5.

The area between the existing ATH monthly close and the ATH weekly close has turned from a resistance to a support zone. This area was the extent of the correction of lesser wave degree on October 15, and provided support in the sharp wave C decline this afternoon, dropping over 2000 points in a matter of minutes.

After some back-and-forth, I have settled on the following wave count of the last rally and this weekend's correction. The depth of the correction finally convinced me that last week's rally was a first wave, and the weekend correction its second wave, labeled wave i and ii.

If the assignment is correct, the third wave should take out the ATH in the next few days.

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The bull market is still young, and the rally only in its infancy. Breaking the all-time high should accelerate prices and get the public more involved. So far, most of the advance from 29k has been from Whales and long-time holders buying every dip they can. The mean coin age is steadily rising. All technical internals of this market, from price to on-chain data, exchange data, funding rates, miner hash rates has been bullish. It was clear all along that the Spring "Crash" was a technical correction, never a bear market.

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Speaking of "acceleration"... The first impulse out the bottom of wave ii (assigned per my last chart) was a 2700 point impulse achieved in about three hours on small time scale.

This is a third wave and Prechter writes about them: "Third waves are wonders to behold. They are strong and broad, and the trend at this point is unmistakable..."

By today's metric, the market is only another few hours away from a new ATH.

But what goes up fast can come down even faster... The wave count is 5 of that impulse, and a deep correction can threaten a new ATH weekly close.

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Not this time.
BTCUSD 62,470

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It is useful to look at the bigger picture.

The first ATH value has been set: Weekly close.

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Why would anyone try to short the trend, when the trend is your friend. The trend is unbroken since the COVID crash.

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Tonight's rally has finally broken its trend line, and gone into its consolidation phase after five waves up. The third wave was doubly extended with a length of almost 3 times the size of one, and the fifth wave was larger by 1.414, a level which is confluent with 4.00 of 1 measured from the end of wave two.
Overall a move of 3700 points, from 58.9k to 62.6k.

The correction of this move might be steep, could go to 60.3k, the 61.8% retracement level (log), but I doubt it will reach this.

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The market retreated to 60.6k (so far), a little past the 50% level. Had it not been for a new local high in the B-wave, it might have gone to 60.3k. It is an expanded flat.

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The volatility in this market is only growing and this will continue for the next weeks and months.

So, the correction finally produced another spike downward beyond the 61.8% level I quoted. It was our new green zone that stopped it, with a reject at the old ATH weekly close, just below 60,000.
Within minutes after this last push down, the price catapulted back up by 1700 points to 61,600. This should be another third wave (of one higher degree) and we will see where it leads. Waiting to take some measurements once prices settle down a little and internal wave structure can be seen.

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BTCUSD back at 62,000. Exactly.

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All this should flush out some of the leverage, OI has been increasing.

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It looks like the price behavior with these large swings of the last couple days may be a large triangle formation, as indicated in this chart.

It should not be a straight triangle, but part of a WXY combination. A triangle can only occur in the last position of a combination, so the correction should be coming to an end pretty soon. Currently, it may be in the D wave or already in the E-wave.
Interior labels may still need additional adjustments for the various three-waves.

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The alternative, which I had been pursuing so far, are a series of first and second waves, but this got suspicious pretty soon.

Also note that the data source for this chart (BITSTAMP) has these sharp spikes once a while. There was one over the weekend, IIRC, and another one today, a single wick deep down into the green zone. These must be causing a lot of problems for traders with stops. This does not show up in other exchange data.

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Although this idea of a triangle seems completed now, I can also make arguments for a diagonal, based on the action thereafter. It could even be an ending diagonal, I think, which would call for a larger correction.
Price has been pushing higher, even with a new high, but it doesn't look impulsive this morning. ATH is less than 2000 points away from that new high, a healthy third wave would take it out. Of course, the resistance here is maximal.

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BTCUSD 63,300

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Caution is in order here...

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Indeed...2000 point drop.

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This looks more and more like a diagonal with four waves completed. The fifth wave could shoot up very high, and be retraced very deep.

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Coinbase Pro has a sell wall at 65000, and one also pops up intermittently on Binance. They also put one up at 63.5 and 64.0. All probably very fake.

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BTCUSD 64000

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BTCUSD 64,500.

It is like a countdown now. 500 points to go.

I am counting the last wave up as an extended wave (1-2, 1-2) because the sizes don't match up otherwise, a third wave cannot be the shortest wave of an impulse.

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After the ATH is broken, I am looking for completion of a fifth wave, and then a decent retracement.

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BTCUSD 66,000 and going.

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While a new ATH is in, this pricing level still needs to be confirmed by a daily and weekly close above the old ATH for sustained growth.

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Meanwhile, ETHUSD has finally printed a new local high since the summer correction lows, percentage-wise a similar move as that of BTC, over 7%.

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I can see this running to 67.5k in short time, a 2.618 Fib extension of the first wave in the prior chart. It has so far stopped at exactly 2.0 multiple for the fifth wave. I have not even analyzed the new waves.

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It essentially ran to the 2.272 extension, just a few dollar higher to above 67000, before entering a correction. But I am not sure that this is the entire wave yet, as it was extended, I think. So this correction of about 800 points (rather shallow), is just a fourth subwave, and we should look for more upside after the correction is done.

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Looks like the first significant correction post ATH may be finished.

If nothing changes, it was an ABC correction with C formed from a large ending diagonal terminating at about 65.6k, with a depth of almost 50%. Perhaps we should examine to see whether this can be counted in some way as a new 1/2 sequence.

The third wave ended at a 5x multiple (67000) of wave 1, in confluence with that 2.272 Fib mentioned earlier.

Going by the assignment as a fourth wave, we should expect a fifth wave to unfold with NO RESISTANCE overhead anymore (price discovery). Trend lines, Fibs, and wave counts are all we've got going for guidance.
For the fifth I find some confluence at about 67.5k and 68.1k.

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That was surprising.... but perhaps not, volatility goes not just up. It will only get wilder when this bull market matures.

So, the depth of that correction in the end wiped out the entire fifth wave, which make me believe that it was finished at the top of about 67,000. The market entered a new 1-2 setup, I think.

This spike down occurred just at the moment as Ethererum was about to print a new ATH. It was less then 10 dollars away from the top. Somehow that can't be a coincidence, as the two markets are directly linked by ETHBTC, which has been tearing it up since yesterday, driving ETHUSD to incredible gains in just a few days.

I think it is time to review the longer term structure of BTCUSD since the September correction.

With a new ATH in place, entering a stage of price discovery mode, we need to look out carefully for possible distribution by the miners, who have been mostly in holding mode for months. Same applies to some long-term holders. This might indeed cause wild volatility as we just saw. On Kraken, this spike down went down into the low 50k, which seems bizarr, and must have wiped out many longs, especially leveraged positions.

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This was a good backtest against the old ATH, as much activity centered on that line overnight.
The market is now heading up again, toward 66k.

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Quite a shake-out here. Went even deeper than in my last chart. In fact it took out wave labels that I thought were safe. The wave count needs work, this appears to have been the top of multiple waves 5.

It is interesting that the market waited for Ethereum to complete its fives, missing the ATH by just a few dollars. Based on that observation, the count for the BTC correction might be a WXY. In September, ETH waited for BTC, before dumping.

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The flash crash on 10/21, reportedly due to a trading software bug on the Binance US exchange, is still having its effect on the markets, While BTC recovered quickly from the almost 90% price break (to 8200 USD), it has caused prolonged effects and triggered a down-trend, that eventually seems to have broken market structure in BTC, which was definitively in an impulse 1-2-3-4-5-structure. The consequences also impacted the Ethereum market in a milder manner, but preventing it from reaching the imminent breaking of its ATH of May. ETHUSD was in an equivalent wave sequence at the time, but this market so far has managed to sustain the bullish wave count, narrowly missing the invalidation by avoiding price action from wave four into wave one of the sequence.

As exactly this happened in the BTCUSD pair, the market now has to build a new 1-2 wave pair to restart the bullish sentiment. If it manages that feat, we should anticipate an extended third wave, which might ultimately be a bonus in the short term, but has consequences for the structure of a future wave five, that would probably take the penalty in size.
Short-term BTC still seems to be struggling with the 60k support line, or better the green zone that I should in my October 18 updated chart. Indeed, this green zone has been the primary support for the past day or so.

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In any case, ... this has been an excellent position to add to BTC and ETH holdings.

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While ETHUSD has achieved a new all-time high (ATH) yesterday, BTC is still engorged in its triangle correction in fourth wave from its own new ATH. Considering the tremendous gains since the lows of the September correction, the size of this correction has been fairly shallow, reaching down from 67k to only into the 56k area for brief moments. It appears that wave D of this triangle is finishing or has already finished, and we should expect one more wave down (E) to fill the wave count, before continuing to new highs.

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Closing out October, Bitcoin is in a strong position to print a new all-time high monthly closing price, currently above 61k, up from about 58,800 of March 2021.
This would be another bullish indicator in BTC's arsenal of achievements after a month of gains of over 40%, that included a new all-time high on intra-day/week/month basis.
This comes despite BTC's current position in correction mode in a retracement from its new ATH of about 67.0k.
There has been some increase in leverage and exchange inflows for distribution, but the mean coin age continues to climb, and miners are holding as well. There does not seem any indication that the broader public has engaged in panic buying (FOMO), quite to the contrary as Google searches for crypto terms are reported to be lagging prior rallies.
The current trading still appears as a triangle correction, but a short term shake out cannot be ruled out completely.
The overall bullish trend should continue for November in a substantial, perhaps even enormous, rally.

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New monthly closing ATH: 61.3 k$

I have a hand-annotated chart that I created in April/May of this year, before the deep crash, on which I estimated the Bitcoin price for the bottom of the correction at about 30 k, and for year end to about 90,000 USD. I am sticking with the 90 k figure, but I am moving it to the end of November.

Like October, I think we will see 40% to 50% gains for the months of November and December.

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Here is the correction that ended with the end of October in wave E of the expanding triangle. The move upward from there is a leading diagonal that led to the monthly closing ATH. Being a leading diagonal I expected a sharp decline (short term shake-out), and that happened swiftly thereafter.

The chart shows our green zone of support that was seriously challenged only by wave C and during the beginning of wave D at the lower boundary of the zone.

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Here is another interpretation of the end of Uptober correction:

The shape of the triangle is a more familiar one, but the lead-in A-wave is large and not so intuitive:

In any case, the choice of count is inconsequential in the bigger picture.

unbeldi

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