Bitcoin dipped below $30k earlier today and is now down over 50% from the all-time high reached in November, 2021. Apart from the fact that Bitcoin has yet to find a useful purpose outside of speculation, there is no apparent reason for the current selloff. Analysts searching for one anyway are pointing to the overall market weakness in other assets such as stocks and commodities, and the strong dollar.
While there is definitely a correlation between different types of tradable assets, we’d like to propose another explanation. It revolves around the Elliott Wave principle and its price patterns, and is much easier to prove since it doesn’t come after the fact. Actually, Elliott Wave analysis helped us predict Bitcoin ‘s decline almost two months in advance. Take a look.
We shared the chart above with our Elliott Wave PRO subscribers on March 13th, 2022. It revealed that the plunge from $69k to just under $33k was a five-wave impulse. Labeled 1-2-3-4-5, this pattern meant that once the following corrective recovery was over, more weakness should be expected. The correction appeared to be a simple A-B-C zigzag that was still in progress, where wave B was a triangle.
According to this count, wave C was still missing so it made sense to prepare for a rally towards ~$50k in the short term. Once there, however, the bearish 5-3 wave cycle would be complete and it would be time for the bears to return. When the downtrend resumed, targets below $33k would be there for the taking.
Is Bitcoin “Cheap” Following its 58% Crash? It Depends on Who You Ask
This was the logic we followed nearly two months ago. It had nothing to do with inflation, crypto whales or Elon Musk. All it required was a chart and an eye for Elliott Wave patterns. As it turned out, that was more than enough.
Wave C couldn’t even reach the $50k mark. The best the bulls managed to achieve was a rally to $48 234 by March 28th. From then on, the selling pressure kept increasing and eventually led to a new low of $29 731 so far. The question of what exact reasons prompted people to sell their Bitcoin now becomes irrelevant when one’s able to predict the selling.
The next question that is much more important now is how far are the bears willing to go? Is Bitcoin a good investment at current prices? Since cryptocurrencies have no intrinsic value whatsoever, an objective fact-based answer is impossible to come up with. A common misconception hides in the thinking that an asset is cheap just because it used to be even more expensive before.
This is a dangerous path to follow. What happens if the market crowd decides the price is still not worth it? What if it suddenly realizes the asset is actually worthless? The good news is that staying ahead of the market crowd is precisely what Elliott Wave analysis often allows us to do. That is why we plan to keep relying on it.
What will BTCUSD bring next week? That is the subject of discussion in our next Elliott Wave PRO analysis due out late Sunday!