What Is Wrong With Bitcoin? It Has Not Rallied to New All-Time Highs Since April

Allow me to answer the title’s question directly: nothing’s wrong with Bitcoin (BTC). And neither will China’s latest “crackdown” have any effect on its price. Only six months after Bitcoin was invented, it was trading at $0.0001 (!) back in 2009, and China announced it would prohibit virtual currencies, albeit Bitcoin wasn’t explicitly mentioned.

Historically, China’s crypto crackdowns are motivated by a need to stem capital flight, control economic freedom in an authoritarian regime, and a desire to support the value of China’s central bank’s digital currency, which is beginning to roll out.

So if a decade’s worth of China’s “crackdowns” has not affected BTC’s value one single bit, other than a few “kneejerk reactions,” i.e., sell-offs, what does affect its value? Scarcity and investors’ sentiment does. The periodic halving cycles BTC is subject to take care of the scarcity. Namely, the scarcer a resource/asset, the more valuable it will become; think diamonds, precious metals, housing, luxury cars, art, etc. Investors’ sentiment is simply a measure of mass psychology, which moves in predictable, well-known ways, i.e., waves: it is best qualified and quantified by the Elliott Wave Principle (EWP).

I have kept you updated on BTC’s “waves” regularly over the past many months. Thus, the mere fact BTC hasn’t made a new all-time high in almost six months is relatively easily explained and nothing out of the ordinary. Namely, in my update from a little over a week ago, I showed you BTC had two options:

• “a bearish potential that can target as low as $29K before the run to $90K+ finally gets going.”
• A bullish potential where price stalls at around $40K and then rallies higher (my preferred view remains that BTC is now working through a corrective 2^nd wave that sets it up for the next launch to $75K. A breakout above $48788 high tells me the current three waves down pattern has been completed, which increases the odds of a new impulse higher.)

Figure 1. Bitcoin daily charts with detailed EWP count and technical indicators.

A break above $48788 is still needed to confirm the anticipated run to $90K+

Over the past nine days, BTC has not done much and held the $40790 level on five occasions. Thus that is now a critical floor. If BTC breaks below it, we can target the 62% retrace level at $37880 and possibly even lower. However, if BTC can break back above the recent $45143 high, labeled as green wave-1 in Figure 1 above, it increases the odds the preferred (black) major wave-2 low has already been completed.

Full confirmation will be achieved on a break back above the mid-September high at $48788, as then the three-wave corrective pattern since the early September high can be considered complete. Hence, we have an excellent stair-step process in place to help assess if the run to $90K has begun or is delayed.

Bottom line: China’s latest “crackdown” will not affect BTC’s long-term ascend as none of its prior ones has had any effect over the last 10+ years. Thus, instead, the EWP runs supreme in explaining BTC’s price action. Bitcoin’s price chart still has a bearish potential that can target as low as $29K before the run to $90K+ finally gets going.

But my preferred view remains that it has likely bottomed for a wave-2 after having, classically, retraced 50% of the wave-1 (June -> September) rally. It is now working through a setup for the next launch to $75K for as long as $40790 holds. A breakout above $45143 is the first sign of good things to come, while a break above $48788 is still needed to tell me the current three waves down pattern has completed, which increases the odds of a new impulse higher tremendously.

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