The price of Bitcoin is down by more than 13% from the all-time high of $124,517 it reached just over two weeks ago, on August 14th. This decline occurs even as the economy remains resilient and a rate cut by the Fed is expected as soon as the middle of September. Michael Saylor also continued his company’s buying spree by purchasing another 3081 Bitcoins a few days ago, bringing Strategy’s stash to over 632,000.
In other words, we see no fundamental reason for this notable drop in Satoshi’s creation. Fortunately, we don’t have to come up with any after-the-fact explanations, because Elliott Wave analysis actually helped us to predict this decline. In fact, it put us ahead of the preceding recovery, as well. Here is how.
We shared this chart with our EW Pro subscribers on August 6th. Bitcoin was trading just above $114,200, down from $123,236. The structure of that decline, however, made it quite clear that a new record lied ahead. It was a simple a)-b)-c) zigzag, with a triangle in wave b), marked a-b-c-d-e. Not only does the preceding trend resume once a correction is over, but triangles also precede the final wave of the pattern, in this case wave c).
So instead of joining the bears near $114k, we thought another surge was likely to follow. As the next chart shows, we didn’t have to wait long for it.
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A week later, on August 13th, the price of Bitcoin was already hovering around $120k after having exceeded $122k two days earlier. Because of our bigger picture outlook, we thought that the recovery from the bottom of wave 4 was going to evolve into another a)-b)-c) zigzag. Its wave ‘v’ was still missing, hence our expectation for one last push higher towards the area near $125k. Then, a notable bearish reversal was supposed to take place. And it did.
Bitcoin topped $124,500 on August 14th and plunged to $117,200 the very same day. By the time we shared this chart with our Pro subscribers, it was still trading below $118k. As visible, we cannot say that we knew that it was going to keep falling. Yes, the bigger picture was still bearish, but that initial drop was still just a three-wave structure. This is the kind of uncertainty every trader has to navigate on a daily basis.
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The way to do it is to accept our ignorance, keep two contradicting alternatives in mind and then identify a concrete price level to separate them. In this case, we thought that the bears had the upper hand below $119,336, but a rise above that level would open the door to a new record high.
As this updated chart reveals, $119,336 survived and the bulls never stood a chance. Two weeks later now, Bitcoin trades around $108k and is back to where it was in May. As for our Pro subscribers, they already know where our current invalidation level is, of course.
