The crypto market has witnessed a bloodbath over the last couple of months, with most coins experiencing a 90%+ correction from their previous high. The crash in prices has had a substantial impact on crypto businesses who have been forced to lay off staff while banks and crypto millionaires have been declaring the death of bitcoin. This gloom and doom sentiment is typical of a bottoming phase in the underlying asset, as many who bought during the previous bull run liquidate their holdings or avoid anything crypto related.

This is exactly the time to enter the market, when very few dare to. Like the saying goes, “the time to buy is when there’s blood in the streets”. In my previous post on Bitcoin, I provided two views on where I saw the price going. My first chart had the price drop to the $4,700 mark which corresponds to the 38.2% fib retracement from the $465 low in August 2016, while the second count would see Bitcoin bottom near $3,000 at the 50% retracement, which is the lowest level allowed for this correction to be seen as a Wave 4 according to Elliott Wave theory.

Elliott Wave analysis BTCUSD – November 10th 2018

Identifying a Bottom

So where do we stand now? Is a bottom in place? There are a few guidelines that can help us answer this question:

  1. The price action needs to move up in 5 waves instead of 3 – Yes
  2. The price needs to rise above the previous wave 4 top – Yes
  3. The price needs to rise above the 50% retracement of the drop from wave 2 of C to the recent bottom – No
  4. Wave C (or C of Y) of the previous correction needs to show a 5-wave down move before it can be considered complete – Yes

Elliott Wave analysis BTCUSD 15min – December 19th 2018

As shown in the above chart, conditions 1 and 2 of the list are met given that the price is rising in 5 waves rather than a 3-wave ABC structure as we have been experiencing in all the previous up moves. The price has also risen above the previous wave iv top and the correction since November is displaying a clean 5-wave structure, two additional elements that, combined with the former points give a strong indication that a bottom is in place.

To get a full confirmation of a bottom, we should expect the price to rise above the 50% retracement of the full down-move from circa $6,550 to be sure the it isn’t rising as another corrective wave 4. For that to happen we need to wait for Bitcoin to reach $4,900 so there is still some way to go but we should soon find out as a long-term bottom is usually followed by a strong move up.

Elliott Wave analysis BTCUSD 1day – December 19th 2018

Price Forecast

In the very short term, I expect the price to rise around the $4,000 mark to complete a 5-wave move up and then drop somewhere near the blue box shown in the second chart, to be then followed by a strong rally above $4,000 to confirm the bottom is in place.

Assuming Bitcoin just completed the larger wave (4) from the $20K top, we should see the start of the next bull phase on the long-term trend too. The above chart shows my primary bullish count in blue which should see the price rise to new all-time highs in the next year or two to reach the $100k level. This is my primary target as it plays nicely with the count and fibonacci levels shown.

I have also included an alternative bearish count which was first suggested by fellow crypto EW analyst Ryan Wilday as one of possible counts (his training material is a must for any crypto trader!). This scenario would see last year’s top labelled (3) actually being already a (5) of larger (III), and should then see the current move up as corrective in nature and stay under $20K level. This is not my expectation at the moment, but is something that needs to be carefully watched as we reach the red box.

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Responses

    1. Matthias Post author

      Pretty much 🙂 But if you plan for 3-5 years, then you want to be careful because the bear market that will follow this rally is going to take Bitcoin to levels not seen since 2015-6!

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          1. Nicholas

            Yep, and most of the “investors” and thinkers stay just an average, small investor and ordinary thinker, and its not a coincidence…
            We can see only one thing in crystall-clear, in 100%: the blockchain and crypto are here to stay. Maybe the project and markets will be changed, but who is patient, easy to win in long term.

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    1. Matthias Post author

      I’m not into posting daily updates but I see two scenarios there, 1) we hit wave (i) yesterday at $3,923 and had a very shallow (ii) which is typical off a bottom, and are now already moving in wave i of (iii), 2) we had an extended wave iii and just topped wave (i) at $4,171. Whether scenario 1 or 2 plays out depends on how deep the price drops from here. Hope it’s clear enough.

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  1. Cornel

    Even though I’m not specialized in the technical analysis, I definitely enjoy following and see what people knowledgeable in this field have to say, since it offers a mathematical perspective on it as well and broadens the perception about Bitcoin.

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