It has been a little over a month since BTCUSD fell to $1830 on July 16th. Just as panic was starting to settle in, the bulls returned with fury. A few days ago, the biggest cryptocurrency hit a new all-time high of $4480. The hard fork is behind us already, Bitcoin Cash is doing pretty good as well and July’s scary dip is nothing but a distant memory now. However, Bitcoin is notorious for its volatility, which could wipe out entire accounts in a nanosecond. Should we expect another sharp pullback, similar to the previous one? Let’s ask the Elliott Wave Principle.
The 4-hour chart of BTCUSD allows us to see the wave structure of the rally from $1830. According to the big picture outlook, this phenomenal surge fits into the position of wave (5) of III of (V). Since wave (5) travels in the direction of the larger trend, it is supposed to form a five-wave impulse. As visible, it could already be seen as one, with the exception that wave 5 has not yet made a new high above wave 3. Wave 1 climbed to $2938, then wave 2 dragged the price down to $2400 and wave 3 added another $2080. At one point on August 22nd, BTCUSD was down by $880 in wave 4, which leads us to the present, where the final wave 5 of (5) of III is in progress.
If this count is correct, wave 5 should lift the price a new all-time high above $4500 very soon. However, instead of buying the bullish breakout, we believe traders should proceed with great caution, because according to the theory, every impulse is followed by a three-wave correction in the opposite direction. In that case, the anticipated decline should be labeled as wave IV of (V) and has the potential to erase roughly $1500 of Bitcoin’s price and revisit the support zone near $3000 per coin. Be careful.
