Bitcoin (BTC) Expected To Make Deeper Correction Before Recovery
I have been calling for the Bitcoin correction for a very long time now and where others were investing at $18-$19k expecting it to just keep rising, I sat back and patiently waited for the correction waves to begin because to me, BTC was simply another financial asset making textbook moves in accordance with The Elliot Wave Theory.
You can see from my screenshot below that after BTC made the high, forming the head of a potential Head & Shoulders chart pattern, it fell quickly into a downtrend - making lower highs and lower lows. We have a small recovery, forming the right shoulder and then a further drop to the downside to break the neckline. - I never take a short position on the break of a neckline, I always wait for a Break + Retest and providing my entry requirements are met and price action is bearish, I would then look at taking a short.
BTC did make another attempt to break to the upside, retesting the neckline and it has so far held as strong resistance. It is highly possible that BTC will drop from here to make a deeper correction before any real recovery.
How Deep Will Bitcoin Drop?
If we look on the daily timeframe, we can see that price is on the final leg (Wave C) of the correction cycle and I am expecting completion of Wave C near $8k. However, price has found dynamic support on the daily 50ema so that is an area to keep watching. We want to see a clear strong break and close below the daily 50ema which would give confluence for further downside.
I hope this analysis has been helpful - I would be interested to hear some views from other traders and of course if there are any other pairs that you would like analysed, feel free to drop a message below.
lovely chart, thankyou for the post!!
As far as Elliot Waves go, this is a pretty textbook play as you mentioned. There aren't too many ways to draw the waves. However, a 60% correction from ATH seems a bit much considering there was already a 40% correction right after the ATH. I can definitely see the price touching 11K and then 10K though.
Hi
Thanks for the comment :)
I understand what you mean, it would be a deep correction, however, I feel it is possible with all the negativity around 1st Gen BTC fee's and transaction times. Also, $8k is an untested level as support and the longer price stumbles around, the more nervous it makes investors. When we see the drop to near $10k, I think the panic could certainly drive us lower and touch those untested levels.
Post Update
We've seen BTC test and confirm the neckline as valid resistance and have seen as much as a $1500 drop in value for BTC before pulling back to $13500.
Zooming into the 1-Hour timeframe we can see price is finding dynamic resistance on the 1-hour 50ema pushing price down further.