🥇 First rule of investing? Know when to save! Up to 55% off InvestingPro before BLACK FRIDAYCLAIM SALE

Bitcoin: Will It Correct Back To $40,000 Before Making Another Upward Trek?

Published 04/30/2021, 04:07 PM
Updated 07/09/2023, 06:31 AM
BTC/USD
-

Bitcoin has essentially not gone anywhere since late February. So what is going on?

Using the Elliott Wave Principle (EWP) combined with technical analysis, we can see that BTC has likely been in an irregular flat correction since hitting its late February top.

Flat corrections consist of three larger waves: one wave down (a), followed by one wave one up (b), and a subsequent wave down (c). They are called “flat” because the instrument is essentially mainly moving sideways. It is a typical side-ways consolidation pattern after a long runup, which shows buyers are still in control, but some profit-taking is taking place before the next runup kicks in.

In addition, waves a, b, and c, of a flat are made up of smaller waves as well: wave-a consists of three waves, wave-b as well, but wave-c consists of 5 waves. Thus, in more detail, after the runup peaks, often a strong 3rd of a 3rd wave, the instrument will see a 3-3-5 move.

Let’s put this EWP to the test. See figure 1 below.

Figure 1. Daily Bitcoin candlestick chart, with EWP count and technical indicators:

Bitcoin Daily Chart With EWP And Technical Indicators.

Bitcoin topped in mid-February, declined into late-February, then rallied into mid-April. Besides the last week, it has been falling since. Thus, this describes a down-wave followed by an up-wave and now in another down wave. The first decline (red wave-a) consisted of three smaller waves: green waves a, b, c. From late February into mid-April, the rally comprised three waves: green a, b, c. With the internals of those waves matching typical Fibonacci-extensions. The mid-April all-time high was 1.382x the length of the February decline, a special relationship between wave-a and wave-b in an irregular flat.

The subsequent recent decline to around $47,000s consisted of five (grey) smaller waves. Thus, for now, there’s been a 3-3-5 move since the late February high. This means two things: either the flat correction is over, and a run to new ATHs is under way (red path). Or, these smaller five waves are only the start of a more extensive five-wave down sequence (green route). How do we know which option is operable?

Simple: If the price of BTC stalls at around $60000 +/- 1000 and then starts to decline, the green path is operable. But if the price continues to rally past the upper end (>$61K), then the red course is most likely, and BTC should be on its way to $90K+.

Bottom line: Since financial markets are all about the possibilities of probabilities, Bitcoin is at a crossroads. It can decide to rally a little more before declining to the $40,000 region, but possibly as low as the $30,000 level. Or, it chooses to rally rather directly to new ATHs. We will know over the next few days which it is. Either option will be a great buying opportunity, so now may be a good time to be patient and let the market tell us where and when to place a low-risk, high-reward trade.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.