Thursday, October 6, 2022

Ahead Of The Bitcoin Curve Since The Tesla Let-Down


On May 12 the price of the biggest cryptocurrency plunged from over $57k to sub-$46k after Tesla (NASDAQ:) CEO Elon Musk tweeted the company will no longer accept it as payment. The Tesla disappointment was just a catalyst for a decline that was supposed to happen anyway. The Elliott wave stage for it was already set.

The News is Just a Catalyst at Best

Even though it’s been almost three months since that article was published, we never stopped sending premium analyses to our subscribers. Fortunately, the Elliott Wave principle kept putting us ahead of most of Bitcoin’s wild swings. The chart below, for example, was sent to clients just three days later, on May 16.

This chart shows that despite the reduced price, we were in no rush to join the bulls. There was an alternative bullish count to keep in mind, of course, but we thought the bears remained in charge with targets near $42k. This was the count to rely on as long as traded below $53500. Fast-forward another three days, it turned out $42k was an understatement.

By the time we sent our next update to clients, Bitcoin had already breached the $40k mark. The selloff was accelerating and we though fighting it was a lost cause. Besides, lowering the stop-loss level to $45872 locked in some profits while leaving the position open. The very same day, Bitcoin plunged another 24% to $30066.

The sharp drop from the top of wave 2 shaped up as a five-wave impulse, labeled (i)-(ii)-(iii)-(iv)-(v), where wave (v) was extended. A month later, the pair was still finding it hard to recover in any meaningful way. The choppy sideways movement that followed was not easy to navigate. However, as the time passed, it became increasingly likely that this was a fourth wave. Thus, the low at $30066 was the bottom of wave 3.

Given our big picture outlook for Bitcoin, it made sense for the decline from $68895 to evolve into a five-wave impulse. This means a new low in wave 5 can be expected. Wave 5 was supposed to breach the low of wave 3, so levels below the $30k mark were very likely.

Bitcoin ‘s Downtrend Doesn’t Move in a Straight Line, Either

On the other hand, the theory states that a three-wave correction follows every impulse. Instead of joining the bears below $30k, we thought traders would do well to simply stay aside in anticipation of a bullish reversal. In all likelihood, wave II was going to lift above $40k again.

Alas, identifying a setup is just half the battle. Waiting for the setup to bear fruit is another skill. The bears reached $28600 in wave 5 of I on June 22nd, where the bullish reversal took place.

Another months later, in our July 21 update, it looked like wave II was still in progress. The recovery to $36624 was too small to be the end of it, so we thought wave II was going to evolve into a larger correction. Wave Y was expected to lift Bitcoin above $40000.

Bitcoin exceeded $40k on July 26 and then kept rising until it reached $42615 on the first day of August. Due to the structure of that recent rally, wave II is now labeled as a regular A-B-C flat correction instead of a W-X-Y double zigzag.

Note that our analyses are purely Elliott Wave-based and hardly mention anything from the whirlwind of everyday crypto news. Even if traders could follow it all, predicting its exact impact and significance is humanly impossible. Fortunately, the market is very good at incorporating all these little pieces of information into its patterns. That is why the focus of our analyses is always on them.

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