Bitcoin 2025 and Elliot Wave Cycles With Donald Trump officially assuming office on January 20, 2025, the United States is set to inaugurate what is widely regarded as the most pro-cryptocurrency administration in history. Whether this development will ultimately prove beneficial or detrimental to the financial markets remains uncertain.
For cryptocurrency investors, particularly those who closely follow market patterns, it is crucial to consider key principles of Elliott Wave Theory and broader market cycles.
Elliott Wave Theory is a technical analysis framework that seeks to predict market movements by identifying repetitive patterns rooted in collective investor psychology. According to this theory, markets tend to oscillate between extremes of optimism and pessimism in a series of waves.
There is reason to believe that the current market environment may foster a sense of optimism, particularly if the U.S. government were to announce the establishment of a strategic Bitcoin reserve. Such an initiative would likely generate significant positive sentiment among investors. However, as Elliott’s principles suggest, this could also signify excessive optimism—a warning sign for those attuned to market cycles.
A retrospective analysis of previous cycles, combined with an assessment of the current Elliott Wave (EW) count, indicates that the market is likely in the fifth and final wave of the overall EW cycle, which comprises five waves in total. Elliott theorized the possibility of an "extended wave," often occurring during the third or fifth phase of a market cycle. These extensions typically arise from external interventions, such as government policies, which can either amplify or suppress natural market dynamics. While such interventions may alter the scale of a wave, they do not disrupt the overarching five-wave structure.
At present, it appears the market may be on the cusp of an extended fifth wave, potentially leading to a significant "blow-off top" in the ongoing cycle. By employing trend-based Fibonacci extensions, it is possible to project key price levels. Measuring the start of the cycle to the projected peak of wave 5 suggests a top around $107,000, followed by a corrective move bottoming near $89,000. This analysis yields potential upside targets of approximately $123,000 and $145,000 respectively.
Despite the apparent upside, investors should remain cautious at these levels.
If the U.S. government announces a Bitcoin strategic reserve, the event could prompt a "sell-the-news" reaction, heightening the risk of a sharp market correction. In my assessment, the potential downside risks may outweigh the anticipated gains.
Ultimately, only time will reveal the full impact of these developments on the cryptocurrency market.
