The last time we wrote about Bitcoin was on August 1st, 2016. The cryptocurrency was trading at $620 back then, after a decline from as high as $779 in June. Over four months ago, in the article titled “Bitcoin Hiding an Ace in the Sleeve?”, we shared our thoughts that “we should not be surprised if Bitcoin declines to $450 or even $400, but as long as the bottom at $152 holds, the outlook remains quite positive in the long term.” Here is the Elliott Wave analysis our opinion was based on.
The logic was simple. Between $152 and $779 there was a five-wave pattern, called an impulse. According to the theory, every impulse is followed by a three-wave correction in the other direction, before the trend resumes. Four months ago, we thought Bitcoin’s three-wave decline was not over and the bears should drag the price of the virtual currency lower, only to provide better buying opportunities. Today is December 6th and Bitcoin’s updated daily chart looks like this.
BTCUSD fell to as low as $465 on August 2nd after hackers stole $65 million worth of Bitcoin from a Hong Kong-based exchange Bitfinex. It was not us, of course. It was the Wave Principle ahead of the news once again. But instead of panically selling, Bitcoin investors should have done the exact opposite, because the price of Bitcoin climbed to $778 two days ago. As it turns out, following the news did not work out. Trusting the Wave Principle did.
Now, we are still bullish in the long-term. In the short run, however, things start getting complicated. Let’s take a closer look at Bitcoin’s progress in the last four months.
The bulls seem to be getting tired. This is indicated by the wave structure of the post-hack rally, which could be seen as impulsive, but also by the relative strength index, which shows the typical divergence between waves (iii) and (v). Furthermore, wave (v) is an ending diagonal, suggesting a reversal, as well. If this is the correct count, Bitcoin traders should expect a decline of about $100 in the price, before the bulls return in wave 3 of (3) of III. However, selling BTCUSD is not a sure shot, if anything in any market ever is, because according to the alternative scenario below, it might be too early to prepare for a major correction.
There is a possibility for Bitcoin to continue climbing in a series of fourth and fifth waves, if we assume the most recent high at $778 was just the end of wave iii) of (iii) of 1. Then, the anticipated decline would be much smaller in wave iv), followed by new multi-month highs in waves (iii) and (v) of 1, preceding the weakness in wave 2.
In any case, Bitcoin’s uptrend remains intact, as long as $465 holds. Even if we see a 100-dollar decline from now on, there would be no reason to worry, because it would be nothing more than the rest the bulls needed to regroup, in order to continue their journey to the north.