Bitcoin: Is the Bottom In?

Eye on the Price

Before we start the Chicken Little dance, given that bearish emotions are high, let’s take a quick, objective trip down memory lane first.

1) In our late-November update, we explained, based on the Elliott Wave (EW) Principle, why we were still long-term Bullish on Bitcoin (BTC), noting that “… comprehensive, multifaceted analyses of the yearly, monthly, and daily charts indicate the potential for further decline to around $74000 ± $ 2000 first before moving higher.”

2) We have kept that posture, as in early December, we found that “at this stage, as in 2015, … we can’t rule out a lower low near the upper end of long-term support ($69-73K) this year before Bitcoin takes off.”

3) In our previous update, we explained that “Typically, the 3rd wave extends to the 138.2-161.8% extension …. On November 21, the low at $80,562 was almost at the 1.618x extension …. After W-iii, W-iv, and W-v will follow. The former tends to target the 76.4-100% extension zone, whereas the latter then targets the 176.4-200.0% extension zone. The January 14 gray W-iv high was almost at the 76.4% level: $97,943 vs. $99,068. Thus … Bitcoin’s price action appears to follow an impulse pattern to the downside. …. As such, …, we expect it to reach the 176.4-200.0% Fibonacci-extension zone at $76335-70970 for the gray W-v.”

These observations are important because they set the framework for what has happened, what is happening now, and what is likely to happen. Fast forward to today: BTC moved lower as expected, bottomed out at $60,069, and is now trading in the low $70Ks. Thus, BTC reached—and then exceeded—that target. Extensions of this magnitude cannot be foreseen in advance. See Figure 1 below.

The Weight of the Evidence

However, despite the lower low, it has followed the impulse pattern we outlined week after week very well and should now be wrapping up its final (orange) 4th and 5th waves, which will conclude a larger irregular expanded flat, red W-iv, comprising green W-a, -b, and -c, which in turn form a 3-3-5 pattern (gray a, b, c – a, b, c – i, ii, iii, iv, v) right around a 50% drop. From there, red W-v can start at least at $164K. History shows Bitcoin’s 4th waves frequently drop 40–55% — sometimes deeper. The current ~54% retrace fits that pattern perfectly. See Figure 2 below.

Lastly, our EWP analysis suggests a move slightly lower is still likely, but we do not expect it to drop much below $60,000 for two primary reasons:

1. Electrical Cost: The current E-cost to mine one BTC is ~$58,740. Historically, Bitcoin rarely traded below this level for extended periods.

2. The Z-Score: This metric measures how statistically stretched Bitcoin’s price is relative to its history. Bear market bottoms typically form between -1 and -2 standard deviations. We recently experienced a -2σ downside event, which is significant. While these events rarely mark the exact bottom, they signal the start of the bottoming process, often followed by sideways or slightly lower price action (4th wave) as a final floor is established.

Both factors align with our EW count, which we’ve been using for months, providing weight of the evidence in favor of a significant bottom forming and showing the predictive power of the EWP.