Has Bitcoin (BTC) Completed Correction?

BTC has been correcting for almost a year, more specifically since the high made on April 14, 2021. It is possible that this correction is over.

Long-term adjustment

BTC started a long-term five-wave bullish impulse in December 2018 (white). The most likely scenario suggests that wave three completed on April 11, and BTC has corrected inside wave four since then.

Due to the concept of rotation, waves two and four should differ in time or price movement. Since the waves are of similar duration (263 days and 281 days), it makes sense if they differ in their retracement levels.

Wave two is deep, reaching the 0.86 Fib retracement level (white). With the above concept in mind, it makes sense for wave four to be shallower, ending at the 0.5 Fib retracement level (black) where the price touched during the recent drop.

BTC/USDT 3-day chart | Source: TradingView

Analyst @24kCrypto posted a BTC chart, where the price is completing a long-term wave 4 triangle. He also pointed out that the RSI has given a bullish signal, which signaled a bottom for BTC in March 2020.

Source: Twitter

While it looks like BTC is in a long-term wave 4, there still seems to be a few valid sub-wave counts that could occur.

The three most likely wave counts are presented in the image below.

A strong correction (black) will indicate that the price will make another bottom. The horizontal correction (yellow) shows that a bottom has been made, but BTC will continue to consolidate, while the red line shows that a bottom has been made and the price has completed the correction.

Below, these three wave counts will be analyzed in turn to decide which wave number is most likely to occur.

BTC/USDT 3-day chart | Source: TradingView

Sharp adjustment

The most likely downside is that BTC is in an irregular flat correction pattern. This means that wave A:C will have a ratio of 1:1.61, resulting in a final low of $12,345.

The number of sub-waves is shown in black, indicating that BTC is in the third sub-wave. In this possibility, the price will break below the channel, confirming it as resistance before resuming the downward movement.

BTC/USDT Daily Chart | Source: TradingView

However, this is inconsistent with the concept of rotation discussed above, as waves two and four will have very similar retracement levels, both falling to the 0.85 Fib retracement support.

Finally, the $12,346 low will break the top of wave one (red line), hence, an invalid correction based on Elliott wave theory (EW).

BTC/USDT 3-day chart | Source: TradingView

Horizontal adjustment

The possibility of neutrality shows that BTC is mired in a triangle containing wave 4.

In this case, BTC will rally towards $55,250, 0.618 Fib retracement resistance before falling again. The entire movement will complete a symmetrical triangle, from which a breakout is likely.

Aside from the fact that the correction could go on for almost 400 days, this possibility doesn’t break any of the EW rules.

BTC/USDT Daily Chart | Source: TradingView

Done adjusting

The last and most likely possibility is that BTC has completed the 4th long-term wave inside the current ascending parallel channel. Among them, wave A:C has a ratio of exactly 1:1, which is the most common in such corrections.

This will complete the running flat correction pattern.

BTC/USDT Daily Chart | Source: TradingView

The main problem with this number of waves is the short-term movement. Since the January 24 low, the next bounce has been more of a three-wave structure than a five-wave structure.

This means BTC will make a slightly higher bottom near $34,000 but still respect the channel or triangle pattern outlined above.

BTC/USDT 3-day chart | Source: TradingView

Short-term volatility over the next few days will be crucial in determining which of these three possibilities will play out.

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