Bitcoin’s Local Top In?

Low $40Ks Reached and Largest 1-day Pullback

Two weeks ago, see here, we showed, by primarily using the Elliott Wave Principle (EWP), that a local top for Bitcoin (BTC) was approaching and found,

“…Thus, W-3 should ideally reach around $39500, then a pullback for W-4 to ~$37750 followed by the last hurray -W-5 of W-v of W-1- to ideally ~$41050.”

Whereas a month ago, we found

“… The alternative remains that BTC needs to wrap up one more set of a 4th and 5th wave before the larger W-2 pullback occurs. … This sequence would target slightly higher at around $40K.”

Fast forward, and the cryptocurrency reached $44735 on December 8. Overall, it was not too bad a forecast, as we were in the ballpark all along. It then experienced its most significant one-day draw down on December 11 since the rally that started in September, suggesting that the rally has ended. See Figure 1 below.

Over the last two weeks, BTC’s price morphed the previous rally (red W-v) into a standard impulse (green W-1 through -5) instead of an ending diagonal. In contrast, red W-iv was a triangle instead of a simple zigzag. As such, we have updated the chart accordingly because all we can do is “anticipate, monitor, and adjust.”

Figure 1. The daily chart of BTC with several technical indicators

Thus, black W-2 should now be underway. 2^nd waves are corrective price patterns that can morph into a zigzag, flat, or any combination. But they will always comprise three waves. In this case, red W-a, -b, and -c. Thus, things should become a bit trickier over the foreseeable future, and it will pay to stay on our toes and be nimble.

In this case, the simpler zigzag is shown (red a-b-c). A break below the green W-a at $40180 can target $36-39K depending on the Fib-extension (c=a to c=1.618x a) the market will choose. From there, we expect at least three waves back up for W-b to ideally $43K. But if a flat develops, it could target as high as $47K before returning to ideally $32.5-34.7K for the red W-c of the black W-2.

Accelerated Rally Does Not Match Historical Patterns

Our alternative at this stage is shown in Figure 2 below. It suggests that BTC is in an accelerated move to ideally $50.8K for red W-iii. A break below $38K will take this option off the table, whereas such a strong move higher doesn’t fit with the prior four phases of Bitcoin we described in a previous article. See here.

Namely, the current phase BTC is in, called “Mid Bull,” saw a drop around the February-March time frame on all three prior occasions, called “higher lows” in Figure 2 of that article. In all three instances, that drop was a 2^nd wave, like what we are tracking as our preferred EWP count now. But since past performance is no guarantee for future results, we must be conscious that “this time is different,” albeit it being our alternative, “our insurance policy.”

Figure 2. The daily chart of BTC with several technical indicators

As you may recall, we have been Bullish on BTC for quite some time, and our prognostications in recent updates have continued to fruition. However, our Bullish scenario is entirely invalidated below $25K. Only when that happens will we change our overall, longer-term Bullish POV, which BTC is proving more and more correct for each update we provide in that,

“Based on BTC’s past cycles, made up of four more minor phases, it is currently in the “Mid Bull” phase and thus close to the next Bull run, which can target $100-200+K by the end of 2025.”