The price of Bitcoin is trading over $28,000 per coin and is up almost 78% year to year in 2023. This can only be a foreshadowing of what is to come, which could be the biggest rally in crypto in a few years – even beating the performance of the 2020 bull run.
Here are the rules and guidelines the Elliott Wave Principle can tell the market about where BTC is in the market cycle.
Bitcoin and Elliott Wave Principles
The price of Bitcoin ebbs and flows between phases of exuberance and irrational fear. During the uptrend, the cryptocurrency topped a record-breaking rally. In a downtrend, up to 80% or more of the up is then removed. But this is just the natural market cycle at play.
In each cycle, according to the Elliott Wave Principle, is a series of five waves that move in the direction of the main trend. These waves appear to varying degrees in all timeframes, highlighting the fractal behavior of financial markets. Because it is a “principle”, Elliott Wave follows specific guidelines, rules, counts, and characteristics.
For example, the wave motif moves in fives with the style, while each correction forms in threes against the style. The result is a five wave pattern with three up steps and two down steps in between. Odd waves move with the main trend, while even waves move forward as corrections. This can be confusing, as individual corrections, if strong enough, can resemble larger wave level corrections.
One particular Elliott Wave rule states that wave four cannot enter the price area of wave one. With wave one topping out at $13,800 per BTC, the invalidation line can be drawn slightly above this level. At the bottom of the recent correction, BTC fell to $15,000, but never in a single wave. This fact can only indicate that Bitcoin is ready for the fifth wave and the last wave for this cycle.
BTC is following Elliott Wave Principle rules and guidelines | BTCUSD on TradingView.com
Does the Cryptocurrency Market Follow Commodity Guidelines?
Additional Elliott Wave guidelines suggest alternating corrections between clear and sideways, short or long. Wave two wipes out almost all rallies of wave one – a typical characteristic of a corrective wave. Wave two also tends to zig-zag, and that’s how the crypto market gets.
Wave three cannot be the shortest, so it is understandable that the 2020 and 2021 rallies will be longer than wave one. The fourth wave correction is usually triangular or flat. The price of Bitcoin is forming a flat correction that is extended in the position of the fourth wave. This is especially confusing in wave A, the fourth wave results in higher heights, before slicing through all the support in the vicious C-wave.
What remains is wave five in the top cryptocurrency by market cap. And here is the most interesting thing. According to Elliott Wave, wave three in the stock market is the longest and strongest, while wave five is the strongest in commodities. With BTC considered more of a commodity than anything else – even by the SEC and CFTC – could Bitcoin be poised for its biggest rally of the year?
In the bigger picture, Bitcoin is also potentially in the last five waves, with a larger five-wave cycle. This may mean there is more power in BTC than ever before for the last grand finale before a more brutal bear market.
If the wave is 5 in #Bitcoin the most powerful because of its commodity-like nature, what happened during the 5th wave of V?
We will find out soon. pic.twitter.com/NxocaUKMWN
– Tony “The Bull” (@tonythebullBTC) March 21, 2023