The crypto market feels like 2022 all over again. After an incredibly strong start to 2023, Bitcoin reached $25 270 on February, 16th. Less than a month later now, the biggest cryptocurrency is crashing again and dragging the entire industry down with it. BTCUSD fell below $19 600 earlier today, for a drop of 22.6% since mid-February.
There is no shortage of after-the-fact explanations for the crypto industry’s current weakness. Depending on who you ask, reasons vary from the hawkish Fed to the rising inflation and the bankruptcy of Silvergate Capital. We think the real cause is entirely different. After all, inflation has been high and the Fed has been hawkish for over a year now. That didn’t stop BTC from surging at the beginning of the year. Silvergate couldn’t have caused the Bitcoin drop, because the price was already falling when the company went bankrupt. It might have accelerated it, at best.
Our explanation, therefore, has nothing to do with external factors such as the Fed, inflation or Silvergate. Instead, we focus on the shapes produced by the price’s path and how they helped us to actually predict the plunge in advance. Shapes better known as Elliott Wave patterns. Take a look.
The 4-hour chart above was shared with our Elliott Wave Pro subscribers on February 15th. It made the structure of the recovery from under $15 500 to over $24 200 visible. Keeping in mind the patterns we recognized on the weekly and daily charts, which are also included in our Bitcoin analyses, we thought a five-wave impulse was going to form on the 4h chart.
At the time of writing, waves i, ii, iii and iv were already in place. Wave i was a leading diagonal, wave iii was extended and wave iv was an expanding flat correction. According to this count, wave ‘v’ was still missing, so we thought another rally can be expected to at least exceed the $25k mark. The bulls could be relied on unless Bitcoin dropped below $21 376.
On the other hand, a three-wave correction follows every impulse. This meant that instead of joining the uptrend near $25k, traders would be better off preparing for a notable bearish reversal. It soon turned out that the bears were more than eager to return.
Similar Elliott Wave setups occur in the Forex, commodity and stock markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!
It took Bitcoin just a day to surge from just over $22 100 when we made our prediction, to nearly $25 300. The price could’ve risen even higher since the exact top or bottom in any market can never be pinpointed. However, the Elliott Wave principle dictated that the next big selloff can’t be too far. Indeed, after spending nearly a week in the vicinity of $25k, the buyers gave up and the sellers to took over.
This situation is a good example of the predictive value of Elliott Wave analysis. Bitcoin ‘s recent tumble was surely exacerbated by Silvergate’s bankruptcy, but its real cause can be find in the patterns. Patterns, produced by market psychology.
Alas, hourly charts can only get us this far. In order to get an idea of where Bitcoin is likely going in the long-term, we need to examine the bigger picture. The good news is that due to the fractal nature of financial markets, the patterns that form on a 4h chart look quite similar to the ones on the daily and weekly time-frames.