Can Bitcoin Still Reach $10K Before Rallying to $40K?

Bitcoin Broke Above $18185

Two weeks ago, see here, I found using the Elliott Wave Principle (EWP) “Bitcoin must break above $18185 and then above $21475 to tell us the downside has already been completed in a rather unorthodox fashion. For now, I find that less likely.” On December 14, it traded as high as $18344, thus giving the Bears the first warning. However, the cryptocurrency closed at $17801 that day and could not even close back above its 50-day simple moving average (50d SMA, the solid blue line in Figure 1 below.) So, where does this leave us?

Is an Ending Diagonal Forming?

The price action since the August high has been overlapping, e.g., the recent stab above $18185, but no daily close above it. As such, the interpretation of it becomes more difficult, but it appears an ending diagonal (ED) 5^th wave is forming. EDs are often 5^th waves. Besides, the structure of an ED is different from the impulse wave. Where the impulse has a 5-3-5-3-5 structure, the ED has mostly a 3-3-3-3-3 structure.

All five waves of an ED break down to only three waves each, indicating exhaustion of the larger degree trend, which in this case is down. Also, Wave 2 and Wave 4 may overlap each other. Most EDs have a wedge shape where they fit within two converging lines. The sub-waves of the ED, consisting of three waves each, are corrective. In Figure 1 above, I have outlined how the internals of an ED can better explain the price action since the August high and, if correct, how it can help anticipate BTC’s future price movement (red dotted arrows).

Thus, the Bears got their first warning with last week’s trade above $18185, but the Bulls failed to follow through and were not even able to close the crypto’s price above that level on that day. Unless the Bulls can get BTC’s price back above the December high ($18344) followed by a break above the August high at $21475, without going below the November lows, the overlapping price action suggests an ending diagonal is forming, targeting ideally $10100+/-500.

Thus, BTC can still target the $10K zone, as told a month ago (see here). Besides, the ED scenario helps better explain the erratic, three-wave nature of the price action since August and why it has been more difficult than usual to get accurate and reliable forecasts.