Last Friday, March 10th, the SEC rejected a proposed change in its rules that would have allowed the Winklevoss brothers to create the first Bitcoin ETF. Following the decision, the price of the cryptocurrency fell over 20%, from nearly $1290 to as low as $975 in a matter of minutes. And while the speed and depth of the move were spectacular, the selloff itself was hardly a surprise. In “Bitcoin Elliott Wave Outlook Ahead of the SEC”, an ARTICLE published several hours before the SEC announcement, the following 4-hour chart of BTC/USD helped us prepare for what was going to happen.
As visible, we anticipated a three-wave decline to at least $1100 before the uptrend could resume. The reason for our short-term bearishness ahead of the SEC was the Elliott Wave Principle, which postulates that every impulse is followed by a three-wave correction in the opposite direction. Since there was an easily recognizable five-wave sequence between $751 and $1350, we thought it was time for the bulls to catch a break. Besides, the relative strength index was showing the typical bearish divergence between the tops of waves (iii) and (v), further supporting the negative outlook. So, according to the Wave principle, there was no reason to load up on bitcoins ahead of SEC. The updated chart below shows how things went.
Well, the Bitcoin crash looks more like a needle than a three-wave retracement, but it is interesting to notice that despite the panic, the plunge stopped right at the 61.8% Fibonacci level. The SEC rejection of the first Bitcoin ETF came just in time to complete the 5-3 wave cycle and create a good buying opportunity, because the uptrend was supposed to resume as soon as the market calmed down.
Less than a week later, the price of one Bitcoin is in excess of $1230 again, retreating from yesterday’s high of $1260. If this is the correct count, reaching a new all-time high is just a matter of time. In fact, our long-term outlook suggests the price of the digital currency is going much, much higher. No Bitcoin ETF? No problem.