Bitcoin’s Correction Continues; How Low Can It Go?

The Correction From the August 15 High is Still Unfolding

Last week, see here, I shared with you that per the Elliott Wave Principle (EWP), Bitcoin (BTC) had most likely completed a leading diagonal (LD) and when that happens

“price quickly drops out of them, moving back to the start of the pattern. In this case, the green target zone at $18.8-20.8K. Besides, the 76.40-61.80% retrace of wave-1/a is between $19.4-20.5K. Thus, there’s a good confluence between the two bolstering the case for a low around that area.”

Since corrections always comprise a combination of three waves (a-b-c) let’s see what has happened since last week. The cryptocurrency topped on August 15 at $25203 and now sits at $21500s. See Figure 1 below.

Figure 1. Bitcoin daily chart with detailed EWP count and technical indicators.

Counter Trend Rally, Aka Dead-Cat-Bounce, Underway

In my last update, I found, “I expect BTC to bottom soon. That is then (grey) wave-a of (green) wave-2/b. Wave-b should then commence, followed by a final wave-c to complete wave-2/b.” This insight was correct as BTC bottomed the next day at $20785. Wave-b is called a countertrend rally, or “dead-cat-bounce,” as the dominate (larger green wave-2/b) is down.

Ideally, this wave-b should target around $22465-23495, but that bounce will be tricky as b-waves consist of three waves. They are, as said, a countertrend, a correction of the correction, and thus three waves. Please know this environment: less predictable, quick reversals—the very nature of a b-wave within a more significant correction.

Regardless, when $22465-23495 target zone is reached, I still expect (grey) wave-c of (green) wave-2/b to commence. Thus, if BTC drops below the June 18 low, the two-month rally was a countertrend rally, and $12K is still possible. Conversely, if BTC rallies above the August 15 high more directly, green wave-3/c is already underway. However, both options are, IMHO, alternative low-odds scenarios, but it is always prudent to have a flexible and open mind.