Is Bitcoin’s Counter-Trend Rally Done?
Bitcoin Elliot Wave Analysis
In late March, see here, I found that Bitcoin (BTC) should ideally target ~$55K. Unfortunately, the cryptocurrency did not reach higher than $48.2K and fell to as low as $38.6K yesterday, whereas I expected a more typical pullback to around $44.4K. Although I got the general path right, it missed the mark. Is this a case of “upside disappoints and downside surprises in Bear markets?” It most likely is because, according to the Elliott Wave Principle (EWP), BTC is in a large 4th wave (Primary IV). Fourth waves are one of the most tricky, unreliable, and least-sensible price structures any asset class can go through. Allow me to explain.
As many of my premium crypto trading members know, corrections are always made up of at least three waves: A-B-C. Each of these waves can subdivide in several ways: 5-3-5 (zig-zag), 3-3-5 (flats), and 3-3-3 (triangles). Given that
- zig-zags can be single, double, or triple;
- there are six different flat corrections;
- at least three triangular patterns (symmetrical, ascending, descending), which can subdivide;
It is nearly impossible to know beforehand which of these 12+ corrective patterns the market will choose. Thus, all one can do is “anticipate, monitor, and adjust” because the final pattern will eventually emerge. Start with the most basic form A-B-C as a zig-zag and then see what it morphs into, or as I always say, “after three waves down, always expect at least three waves back up.”
Besides, focusing on the forest and not the trees allows us to see the bigger picture and not get too hung up on the daily scribbles, which are inherently much more variable in a multi-month corrective pattern than during a Bull run.
Figure 1. Bitcoin Weekly charts with detailed EWP count and technical indicators.
What Pattern Is Emerging?
Although, as said, I so far missed the mark on where I ideally would have liked to see BTC top ($55K vs. $48K), please know already in early January I was looking for “a last drop to around $32+/-2K.” and back then “I expect[ed] this b-wave to challenge the resistance zone at $57.5K to $60K.” See here.
What has happened since? BTC dropped to $32.9K and rallied to $48.2K. Now that the upside target was not reached is simply based on an initial assumption, which is “the anticipate” phase. I honestly do not know of any other tool available that can forecast such price movements months ahead of time.
Thus, after three waves down and three waves back up, the question now is whether the corrective bounce is already over or if we can expect it to become more complex. Figure 1 above shows the two main options currently on the table. Ultimately Bitcoin will choose one of them, and we will be ready: forewarned is forearmed.
The simplest option is that (black) major wave-a and -b of (blue) Primary-IV are complete, and wave-c of IV is now underway. C-waves are often made up of five smaller waves, which I have outlined in Figure 1A in how they should ideally progress. The ultimate downside target zone is $25,5-28K, which should align with the 200w SMA (summer of this year). How do we know this path will be taken? A rally to the “wave-ii?” target zone and a break below yesterday’s low.
The alternative is that Primary IV is becoming more complex and morphing into a triangle. See Figure 1B. The counter-trend rally, wave-b, is subdividing into an intricate a-b-c pattern. Red intermediate waves a, b are complete, and wave-c is underway. It should ideally target ~$59.8K and, finally, fulfill my original call from four months ago. How do we know this path will be taken? Simple. As long as yesterday’s low holds and the price of BTC rallies back above the late March high.
Bottom Line and Bitcoin Price Forecast
BTC is in a multi-month Primary-IV correction of the same degree as the Primary-II wave that ended in 2018 after the 2017 Primary-I top. 4th waves are tricky and can morph into at least 12 different patterns. Knowing which of these beforehand is impossible. Now that more price data has become available, it appears two options remain, and BTC can soon determine the proverbial “last man standing.”
- Rally to around a $44+/-1K and drop below yesterday’s low opens up the door to $25,5-28K for Primary-IV. And from where the Primary-V rally to $150K+ can start.
- Hold today’s low, break above the late-March high, and rally to around $69+/-1K before falling back to around current levels for Primary-IV. And from where the Primary-V rally to $150K+ can start
Thus the stage has been set. We anticipate the next move and can monitor it to see which of these two options BTC will choose.