Bitcoin’s Breakout Became a Fakeout: What’s Next?

Critical Support Failed to Hold

If you are a first-time reader of our work, we have been Bullish on Bitcoin (BTC) since mid-January, see here, all the while acknowledging in each subsequent update that BTC had certain “must-hold levels” to keep the Bullish momentum going. Thus, as we stated in our last update, see here,

“frequent readers may have noticed we continue raising the “must hold levels,” a Bullish sequence. This week it is $28,875. Two weeks ago, it was $26,565. And a month ago, it was $19,597. One can use those as stop (loss) levels, for example. Like then, we know that as long as $28,875 holds, we must continue to view BTC as intermediate- to long-term Bullish.”

These levels -as determined by the Elliott Wave Principle (EWP)- are one’s “insurance policies” to prevent havoc on one’s portfolio. Because there are no certainties in trading and one doesn’t want to become the bag holder. Instead, one has to recognize as early as possible that the trend is in jeopardy by having objective price levels and a flexible and open mind. Or as they say “It is better to wish you are in the market than out of the market.”. As such we already informed our premium members of BTC’s failure to hold critical support levels already last Wednesday. See here.

The Bullish Resolution Failed; Only Three Larger Waves Up?

Hence, with the failed breakout, and yes, breakouts can become fakeouts, our intermediate- to long-term Bullish POV on BTC must be adapted accordingly. Figure 1 below shows the adjusted EWP count. What does this mean? At this stage, BTC has only done three larger (black) waves (a-b-c) up from its November 2022 low, which is corrective.

Hence why we have always labeled these waves as 1/a, 2/b, and 3/c throughout our updates because one can not know for certain if BTC’s price will do five or only three larger waves up. We track for five but know that if key levels break to the downside that path is invalidated. That is the power and beauty of applying the EWP objectively. Thus, a drop below the November low -per the red-dotted path- should now be our primary expectation until proven otherwise.

We are also tracking an alternative scenario where the three larger waves up are only black W-a of the larger blue W-B. See Figure 2 below. In that case, the blue arrows outline the rough path we are expecting over the next few weeks to months. Once the black W-b bottoms, another rally should start targeting ideally $37000+. For now, and in either case, we are looking for marginal lower prices for the short term, then a bounce back to resistance followed by -at least- another leg lower.