Ethereum Dropped More Than Expected: What Does That Mean Going Forward?

The Correction Was Unfortunately Not Complete

The Elliott Wave Principle (EWP) count for Ethereum (ETH) was humming along very nicely as ETH bottomed and topped over the last two months where I thought it would: $1200 on October 18 vs. $1150-1220 expected September 19, followed by a five-wave rally into last week’s high, which I then anticpated to be retraced to $1380-1490, but warned that

“I see no reason to change my Bullish perspective, only if ETH drops back below $1200 with a severe warning to the Bulls at $1320.” See here.

With last week’s FTX/Alameda debacle, the expected drop came, but it was also more profound than expected, and ETH broke below the critical Bullish warning levels. As such, the EWP count required a rewrite. The three-waves-down-five-waves-up sequence since the August high was not a W-i/a, -ii/b, -1/a setup, but most likely a complex W-X-pattern with the cryptocurrency now in wave-Y. See Figure 1 below.

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

The Bullish Resolution is Still Possible, but $1000 Needs to Hold

The W-X-Y pattern is one of the most complex structures one can encounter, and it means ETH, thanks to the FTX/Alameda black swan event, is still in red W-ii/b. Thus, continuing counting/interpreting the June-August rally as a leading diagonal (red) W-i/a, it is not uncommon for the following W-ii/b to retrace back to the start of the diagonal (in this case, the green W-2 low at ~$1000 made early July: see Figure 1 above).

Although the Y-wave does not have to be comprised of the five orange waves, as shown in Figure 1, it would allow for a picture-perfect retest of the $1000+/-50 level. If ETH continues to rally from last week’s low and breaks back above $1550, with a first warning for the Bears above $1375, then odds start to increase W-ii/b has completed and the countdown for the rally to $3500+ restarted. A break below the $1000+/-50 zone will put further pressure on the Bulls and opens the door to as low as $750-350.