BitcoinLong
Bitcoin: The stage is set for the next bull phase
Updated
Bitcoin reached its all-time high price in US Dollars on April 14, 2021. While many traders foresaw the end of the bull run by careful chart analysis, the pull-back was initially fairly shallow with prices dipping below $50,000 for only brief episodes, before prices rebounded to almost $60,000 by May 10. In the following days, however, a precipitous decline unfolded, more typically characterized as the Crash of May 19, that landed the coin almost exactly on the $30,000 line, a decline of about 56 per cent of value. Ever since, speculations and anxiety languished in the media, social networks, and trader forums, as to the eventual price bottom, leaving many to forecast dire pictures for the future of Bitcoin, and perhaps the crypto markets in general, all essentially driven by the asset power of their first and biggest sibling. Many posts in this forum are good examples of this bleak outlook.
The skilled Elliott Wave practitioner, however, has the only tool available in technical analysis that can make sense of the ups and downs of the markets in a systematic, quantitative manner, and that can recognize market tops and bottoms with often amazing accuracy and timing. Let's review the price action from the market top using the principles of this method.
At the market top in April, the Bitcoin chart was showing a rather flat shape, a camel's hump, that started to decline while other coins, such as its next largest brother, Ethereum, continued to spike upward into May 12, just before the crash took them all down within hours. This dull top of BTC was a clear sign of exhaustion of the trend, and found itself expressed in the Elliott Wave chart as an expanding flat A-B-C correction, in which wave (B), in red color, produced the market top, not the preceding fifth wave of the same degree. For the present purposes I am assuming this was the end of an Intermediate degree 1-2-3-4-5 impulse, and the fifth wave, (5), also ended wave ((3)), encircled 3, of Primary Degree since the beginning of Bitcoin trading.
An expanding flat is characterized by a 3-3-5 wave sequence, which can be identified in the chart in red labels (A), (B), (C). Wave C of the sequence unfolded as a five-wave structure from April 14 to June 26, marked by the simple Arabic numerals 1, 2, 3, 4, and 5, in black color. Wave 3 of this bear impulse was the killer wave on May 13, typified by another five-wave sequence with encircled lower case roman numerals ((i)), ((ii)), ((III)), (((iv)), ((v)), of Minute Degree. It ended right in the area of the bottom wicks of the candles of a fourth degree correction in January 2021, which provided the strong support for this entire correction in May and June, in the zone of 29,000 to 31,000 dollars. This area, often identified by other market analysts, proved to be essential support that held the bears in check this summer.
The analysis of wave 4 of this progression is not straight-forward, as is often the case with fourth-wave price action. The principle of alternation can provide some guidance. On first look, it suggests a complex structure perhaps, as the second wave was a fairly simple ((a))-((b))-((c)) affair, but it should be observed that this was not a zig-zag. It was not sharp, but another flat with a 3-3-5 structure. Therefore one might have expected the fourth wave to be more or less sharp or another flat. In the present analysis, this is indeed the preferred interpretation, as shown in the ((a))-((b))-((c)) structure that ends with a price of 40904 on May 26, as indicated, having a c-wave that fell well short of reaching its ((a)) partner. The chart that ensued, can be interpreted multiple ways. What initially looked like a developing triangle correction, was invalidated by a three-wave sequence reaching a hight of about $41,341 (indicated), with a candle wick just a few dollars higher than the preceding high at $40904. This made the assignment of an overall flat double-three (WXY) sequence likely at first. In strict Elliott Wave Theory a wave number two cannot retrace beyond the origin of its first wave, and for this reason I rejected this formation at first. But If we disregard this single candle wick, the price action from May 26 to June 26 fits an interpretation as an ending diagonal triangle perfectly, comprising a 3-3-3-3-3 structure. This is labeled in Minute Degree in encircled lower case Roman numerals (light blue). As expected, wave three of this structure, was the longest and most powerful component, striking from $41341 all the way down to $28600 (per this data source), amounting to a 31% destruction of Bitcoin's already decimated market cap. The bottom was clearly anchored once again by the prior supporting zone, and it became quickly clear that this would be the bottom of this entire correction. If the assignment of the ending diagonal for wave five is correct, then the final fifth wave was exhausted and caused no further harm on May 26. In this scenario, this date may be taken as end of entire correction, marking the bottom of wave ((4)) of Primary Degree. If another interpretation comes to light, the final wave (5), needs to be accounted for properly. Perhaps it was a 1-2 post-correction sequence, only detectable much later on in the bull run.
Following May 26, a five-wave impulse took the Bitcoin price to about $36600, which should be marked as wave (1) of Intermediate Degree of the ensuing bull market. Wave ((2)) progressed in rather complex details that could not be clearly identified until circa July 10, when what appeared to be a couple of 1-2 sequences, collapsed into a descending triangle formation A,B,C,D,E to form a complex second wave scenario as is so typical of many wave-two action in the crypto space. Wave E of this finish is characterized by spikes in short positions and therefore increased volume. It is tarp for bears, and it drives the intensity of bearish conviction to new highs, causing more silly price predictions in greed for lower prices. Wave 2 is a trap for bears and bulls alike, and often erases almost all of the gains of wave 1 at major turns of market direction. Indeed it almost touched the $31000 mark, the start of wave 1 being at about $30200.
What should follow now is a sequence progressions in wave three, (3). Wave 1 and 2 have set the price targets for this, which should reach the top of trading ranging of the last few weeks. No doubt, there are considerable resistance zones ahead, and some struggles are to be expected.
The stage is set for the next bull phase of not only Bitcoin, but other cryptos as well. The Ethereum chart is different in its details of wave structure in many places, but very similar in overall progression and outcome.
The skilled Elliott Wave practitioner, however, has the only tool available in technical analysis that can make sense of the ups and downs of the markets in a systematic, quantitative manner, and that can recognize market tops and bottoms with often amazing accuracy and timing. Let's review the price action from the market top using the principles of this method.
At the market top in April, the Bitcoin chart was showing a rather flat shape, a camel's hump, that started to decline while other coins, such as its next largest brother, Ethereum, continued to spike upward into May 12, just before the crash took them all down within hours. This dull top of BTC was a clear sign of exhaustion of the trend, and found itself expressed in the Elliott Wave chart as an expanding flat A-B-C correction, in which wave (B), in red color, produced the market top, not the preceding fifth wave of the same degree. For the present purposes I am assuming this was the end of an Intermediate degree 1-2-3-4-5 impulse, and the fifth wave, (5), also ended wave ((3)), encircled 3, of Primary Degree since the beginning of Bitcoin trading.
An expanding flat is characterized by a 3-3-5 wave sequence, which can be identified in the chart in red labels (A), (B), (C). Wave C of the sequence unfolded as a five-wave structure from April 14 to June 26, marked by the simple Arabic numerals 1, 2, 3, 4, and 5, in black color. Wave 3 of this bear impulse was the killer wave on May 13, typified by another five-wave sequence with encircled lower case roman numerals ((i)), ((ii)), ((III)), (((iv)), ((v)), of Minute Degree. It ended right in the area of the bottom wicks of the candles of a fourth degree correction in January 2021, which provided the strong support for this entire correction in May and June, in the zone of 29,000 to 31,000 dollars. This area, often identified by other market analysts, proved to be essential support that held the bears in check this summer.
The analysis of wave 4 of this progression is not straight-forward, as is often the case with fourth-wave price action. The principle of alternation can provide some guidance. On first look, it suggests a complex structure perhaps, as the second wave was a fairly simple ((a))-((b))-((c)) affair, but it should be observed that this was not a zig-zag. It was not sharp, but another flat with a 3-3-5 structure. Therefore one might have expected the fourth wave to be more or less sharp or another flat. In the present analysis, this is indeed the preferred interpretation, as shown in the ((a))-((b))-((c)) structure that ends with a price of 40904 on May 26, as indicated, having a c-wave that fell well short of reaching its ((a)) partner. The chart that ensued, can be interpreted multiple ways. What initially looked like a developing triangle correction, was invalidated by a three-wave sequence reaching a hight of about $41,341 (indicated), with a candle wick just a few dollars higher than the preceding high at $40904. This made the assignment of an overall flat double-three (WXY) sequence likely at first. In strict Elliott Wave Theory a wave number two cannot retrace beyond the origin of its first wave, and for this reason I rejected this formation at first. But If we disregard this single candle wick, the price action from May 26 to June 26 fits an interpretation as an ending diagonal triangle perfectly, comprising a 3-3-3-3-3 structure. This is labeled in Minute Degree in encircled lower case Roman numerals (light blue). As expected, wave three of this structure, was the longest and most powerful component, striking from $41341 all the way down to $28600 (per this data source), amounting to a 31% destruction of Bitcoin's already decimated market cap. The bottom was clearly anchored once again by the prior supporting zone, and it became quickly clear that this would be the bottom of this entire correction. If the assignment of the ending diagonal for wave five is correct, then the final fifth wave was exhausted and caused no further harm on May 26. In this scenario, this date may be taken as end of entire correction, marking the bottom of wave ((4)) of Primary Degree. If another interpretation comes to light, the final wave (5), needs to be accounted for properly. Perhaps it was a 1-2 post-correction sequence, only detectable much later on in the bull run.
Following May 26, a five-wave impulse took the Bitcoin price to about $36600, which should be marked as wave (1) of Intermediate Degree of the ensuing bull market. Wave ((2)) progressed in rather complex details that could not be clearly identified until circa July 10, when what appeared to be a couple of 1-2 sequences, collapsed into a descending triangle formation A,B,C,D,E to form a complex second wave scenario as is so typical of many wave-two action in the crypto space. Wave E of this finish is characterized by spikes in short positions and therefore increased volume. It is tarp for bears, and it drives the intensity of bearish conviction to new highs, causing more silly price predictions in greed for lower prices. Wave 2 is a trap for bears and bulls alike, and often erases almost all of the gains of wave 1 at major turns of market direction. Indeed it almost touched the $31000 mark, the start of wave 1 being at about $30200.
What should follow now is a sequence progressions in wave three, (3). Wave 1 and 2 have set the price targets for this, which should reach the top of trading ranging of the last few weeks. No doubt, there are considerable resistance zones ahead, and some struggles are to be expected.
The stage is set for the next bull phase of not only Bitcoin, but other cryptos as well. The Ethereum chart is different in its details of wave structure in many places, but very similar in overall progression and outcome.
Note
Now that this bullish scenario has been finally invalidated by the market, by trading below the origin of the projected wave 1 of that uptrend, the view changes a bit and we have to activate the bearish wave count, which invokes a flat double-combination (WXY) as already hinted in the original post.Still, this final phase in Bitcoin correction, should finally set the stage for a new ATH in the coming months.
Here is the updated forecast:
Note
LOL. Perhaps I should just have stuck with my bull scenario all the way. I actually never gave up on it, but some technical aspects needed consideration.Note
Todays spike needs retracing though and that could go all the way to its start. Wave 2 can reverse it almost all.Note
In hindsight, I believe that the correct wave interpretation of the fourth wave correction of May to July 2021 is to assign a triple-three combination. From early on I had a double-three as a good alternative to the original chart of this post, because the correction had a clear horizontal character. The deciding factor in changing my assignment was the market behavior at the very end of the correction, when the bullish leg up made it very difficult to maintain the count.Markets are deceptive. There are STILL people drawing up bear-fantasies.
Here is an updated chart:
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