The crypto community is locked in debate over: Is Bitcoin in a bull or bear market? The debate will rage on until either a new high or new low is made.
The current price action is bearish, which gives the impression that sellers are in charge. The news cycle, and sentiment doesn’t help the picture for bulls. But there is one “theory” that suggests a lower low won’t be made.
Recently, Elliott Wave International held an Open House on their Crypto Pro Group led by analyst Tony Carrion. Tony nailed the recent 20% crypto market plunge as part of a C-wave and a short-term call.
A longer term play looks ahead toward a positive Q4, where the analyst expects a wave five to develop and “greater price appreciation to occur.” If it fails to do so, then the pattern might not be valid.
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The recent accurate call of a C-wave prompted a deeper analysis of the longer term play. According to Elliott Wave Theory a primary motive wave consists of five waves, with odd-numbered impulse waves following the primary trend. This is Bitcoin we’re talking about, so the primary trend has almost always been up.
A new motive wave and series of impulse waves began at a bear market bottom. Waves two and four are also bearish consolidation phases that move counter to the trend. Tony’s idea is that the run up in early 2019 was wave one, wave two ended with Black Thursday (take note of this), and wave three ended at $65,000 in April.
Wave four should move sideways, while wave two was sharp | Source: BTCUSDT on TradingView.com
What isn’t yet clear, is when wave four ends, and wave five begins. However, when reviewing some facts regarding Elliott Wave rules and guidelines, along with several important factors related to the current market cycle, things begin to fit the mold.
The best argument bears have for more downside in Bitcoin, is a crash back to $20,000 and a lower low scenario – because that’s what happened after the 2019 peak to Black Thursday. However, Elliott Wave rules state that wave two and four will alternate in severity.
Out of wave two and wave four, one correction will be sharp, the other sideways. Looking at the top and bottom of the last correction, sharp is an understatement, especially compared to the most recent “top.”
Each impulse wave also behaves similar with five smaller sub-waves | Source: BTCUSDT on TradingView.com
If wave two was sharp, then wave four will be sideways, according to the alternation in an impulse rule.
“It primarily instructs the analyst not to assume, as most people tend to do, that because the last market cycle behaved in a certain manner, this one is sure to be the same.”
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Also as part of the alternation rule, wave one, three, and five will alternate to a certain degree. Elliott Wave theory says that wave one and five will made in both time and magnitude, especially have wave three was an extended wave. When comparing what would be wave one with wave three, it is easy to see how extended wave three would have been.
All of this information suggests that there won’t be a lower low, and wave five should rally around 350% from where wave four ends.
This is all great news for bulls who were hoping for $100,000 Bitcoin. The only problem? When it is all over, if the pattern is accurate, the worst bear market ever is coming next.
Featured image from iStockPhoto, Charts from TradingView.com
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