Bitcoin traders took the price of the virtual currency to a new all-time high of $1623 on the Bitstamp exchange yesterday. Soon after that it fell by nearly $180 to $1444, before recovering to $1609 again. The cryptocurrency’s violent swings no longer surprise anyone and with Elliott Wave analysis, their direction is not such a mystery, as well. This is the methodology we applied to the following chart on April 11th, while one bitcoin was selling for less than $1210.

The chart made it easy for the experienced Elliott Wave analyst to recognize a 5-3 wave cycle pointing north. The theory states that once the corrective phase of the cycle – in this case wave 2 – ends, the trend resumes in the direction of the five-wave impulse. Hence, we thought bullish bitcoin traders are just getting started and higher bitcoin price should be expected. Less than a month later, here is how the 4-hour chart of BTCUSD looks like today.

After a small dip to $1141 two days later, the price of the virtual currency rocketed past the previous top at $1350, just as it was supposed to. Does this mean buying near $1600 is a good idea? We do not think so, because once again, a five-wave rally from $891 appears to be in its final stages. The larger uptrend might be intact, but every trend is interrupted by a correction from time to time. If this is the correct count, we should see another high in wave “v” of (i) soon, which would probably deceive a lot of people into joining the bulls right away. However, we think waiting for a pullback in wave (ii) is the smarter decision. The anticipated retracement has all chances to drag the price back down to $1350, where the area of the previous major top could be expected to act as support and give the start of an even more powerful surge in wave (iii). Until then, the bulls should probably observe from a safe distance.