BTCUSD Analysis: Bitcoin Harmonics and Elliott Waves

Cryptocurrency market has been up lately after the developments around GameStop, redditors and Robinhood. Despite announcements from the SEC that they will investigate the issue and will draw stricter regulations on trading and investment, some influencers including Elon Musk in their Twitter accounts decided to support the crypto-industry by placing a Bitcoin hashtag on their bio. Mr Musk in his latest podcast also said that he is late to the party but he is a supporter of Bitcoin.

A study by a group of researches at Blockchain Research Lab revealed that all six Tweets done by Elon Musk had an impact on trading volumes of the coins he was tweeting about. The largest impact was on Dogecoin for sure back in December, when SpaceX CEO in his official Twitter account wrote: “One word: Doge”. Just recently, Elon Musk added another tweet: “I became a meme, destroyer of shorts”, soon after his round of tweets on Dogecoin, as a result Doge surged again.

Will there be a Tweet on Bitcoin again? The answer is, very likely. Will there be consequences? The answer is the same. The SEC will surely press charges on Elon sooner or later, the reason they are not doing the same right now is of course the “regulation”. Whenever the regulation is still on draft papers in shelves of lawmakers, the SEC cannot press charges but only file legal statements unless there are petitions. Hence, Bitcoin remains bullish for a short-time.

As for technicals Bitcoin established a weekly high at $38782 and was sent off below the resistance of $37830.

The impulse of February 1 suggests that currently Bitcoin is forming a wave 3 pattern and if remains below the aforesaid resistance, BTC will most likely drop to $34450 levels to test the previous resistance of the last impulse as support. The drop of the BTC is also signalled by a harmonic bat pattern, which mainly is formed during the corrective waves.

As the pattern suggests, the price of the asset after reaching the D point of the pattern should retrace to the point B to test is as support, and to the point C if closes below B.

On the other hand, the logarithmic growth of the number of Bitcoin addresses signals the Bullish continuation of Bitcoin. Another signal of the money inflow in crypto-trading and Bitcoin trading is the recent events related to Robinhood and Redditors, the growing interest in crypto may push some stock traders to leverage their Bitcoin share in their portfolios.

Another indicator to consider is the Stock-to-Flow, which is way above the current price. Having such a high S2F ratio, I’m not expecting a deep correction of Bitcoin in the near time.

Whenever there were money injections in the economy, Bitcoin price felt the safest, hence investors are thoroughly monitoring the situation around the Stimulus package approved by President Biden’s Administration.

Taking into account the bullishness of Bitcoin, I still believe that it should correct a bit before another impulse. A retrace from the current level to $34667 would be the best price action as per the Elliott Wave principle.

As seen on the chart above, the $34677 level is a Fibonacci 0.618 level of the last impulse and a strong resistance, which if rested as support will bring another uptrend impulse as buyers will gain strength.