Examination of a rare corrective pattern of the bull market
Bitcoin’s price in a flash fell below $ 50,000 just weeks after the highest cryptocurrency hit a higher high. Year-end price targets of $ 100,000 or much more are no longer within reach, thanks to a rare corrective bull market pattern that few saw coming.
But although Bitcoin has fallen ‘flat’ on its back, this could be the last time the cryptocurrency does so before the end of the bull market cycle.
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Ask most Bitcoin investors what their thesis is, and the majority would likely point to the cryptocurrency’s scarce supply, halving, or stock-to-flow model.
The cyclical behavior of halving every four years or so is all that has ever existed historically and all the masses must continue. The stock-flow model takes scarcity and halving into account, to predict prices as high as $ 100,000 to $ 288,000 in December 2021. Instead, each coin is trading today at $ 49,000 .
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Additionally, throughout history, whenever the price of Bitcoin has peaked significantly higher, it has continued in a parabolic uptrend. This time, however, it was different. The leading cryptocurrency by market cap hit a new high above and beyond its April peak, but has since corrected to 38%.
So what gives? Well, the first clue of the kind of corrective model that Bitcoin is in relates to that 38% pullback. This is because 38.2% is the 0.618 Fibonacci retracement level. With 61.8% movement in mind, the in-game corrective pattern is likely to be referred to as “running flat”.
Which type of "flat" is Bitcoin trading in? | Source: BTCUSD on TradingView.com
According to Elliott Wave Theory, during bull markets there are two major corrective phases and three upward impulses which constitute the major uptrend. These phases not only alternate between pulse and correction, but the strength of the pulses and the severity of the corrections also alternate. But we will come back soon to the concept of work-study.
The market expected the fifth and final push to be up to $ 100,000 or more, but a “flat” potential has prevented the conclusion of a Wave 4 – so far or now. What is not entirely clear is what type of apartment Bitcoin is in.
The next phase of the Bitcoin bull market begins with the conclusion of a dish
Apartments can be regular, irregular or enlarged, or in very rare cases, “in progress”. Flat flats are so rare, because they occur when longer term uptrends are so strong and dominant, that flat fails to end beyond wave A in the correction.
The comparison above shows that the Bitcoin price action matches the model’s Fibonacci relationship perfectly. The high and wave B stopped at around 123.6% of wave A down, then dropped to precisely 61.8% of wave B until potentially completing wave C.
The question is, does the collapse end here? Or does the price of Bitcoin keep falling to form an enlarged apartment instead? Rather, the 123.6% extension target for an expanded apartment would be closer to $ 19,500 – where BTC peaked in 2017.
Elliott Wave alternation guidelines explained | Source: BTCUSD on TradingView.com
But there is still a lot of hope, for the bulls, according to the Elliott Wave rules of alternation. A primary driving wave alternates between pulses and corrective waves in a five-wave pattern. Even waves are always corrective, with odd waves moving with the main trend.
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Even the corrective waves alternate, in simplicity and severity. One correction tends to be lateral, while the other is sharp. It’s hard to imagine anything more specific than Black Thursday last year. Elliott Wave also points out that one correction is likely to be a simple ABC pattern, while the other is much more complex.
The complexity of consolidation in 2019 compared to 2021 is very different. There is also a clear wave one and a longer wave three which formed a wedge-shaped pattern. If the wedge pattern holds, a widened dish will have been narrowly avoided and the fifth and final pulse wave should begin.
However, the fifth wave is not the happy ending that the bulls are hoping for. The resulting pattern, according to the same Elliott Wave theory that suggests the uptrend is still intact, could result in the worst bear market ever once the uptrend ends.
– Tony “The Bull” Spilotro (@tonyspilotroBTC) December 6, 2021
To follow @TonySpilotroBTC on Twitter or join the TonyTradesBTC telegram for exclusive daily market information and technical analysis training. Note: The content is educational and should not be taken as investment advice.
Featured image from iStockPhoto, Charts from TradingView.com