For those that have been following our work closely, you would know that we called for the bottoming in the crypto complex back at the end of 2018, and saw strong potential for the bull market to resume. Our subscribers benefited quite nicely from our timely and accurate call at the time.
In our last public article on Seeking Alpha, we stated our belief that the rally off the December 2018 low was coming to an end, and that a correction was imminent for Bitcoin. As we outlined to our subscribers, $13,425 would have been an ideal top to Bitcoin, based upon our Fibonacci Pinball calculations. However, due to the strength of Bitcoin’s rally, it slightly exceeded our target and struck $13,900 before correcting 30%.
Sometimes, the strength of a move will cause the market to spike through our target only to see a strong reversal not long thereafter. And, this seems to have been the case recently with Bitcoin.
While Bitcoin was rallying through $13,000, it was quite amusing to watch how emotional market participants were becoming. It was truly amateur hour while watching market participants and even those purporting to be "analysts" cheering the market higher while having no clue as to what was about to happen.
As I have said so many times before, there is no other method I know of that provides market context as well as Elliott Wave analysis. And, as one of my more astute members has noted in the past, the goal of Elliott Wave analysis is to analyze sentiment, not participate in it! So, when sentiment became so extreme that others turned to cheer-leading at the market highs, we were looking for the impending pullback.
Since Bitcoin has topped and begun a pullback, market participants posting throughout social media sites have still been quite stubborn regarding this correction. A recent perusal of the largest crypto youtubers sees titles suggesting a run to lofty targets such as $42K, and even $100K, being imminent.
Yet, while social media pundits are currently still quite bullish, we fully expect to see some turn to look for new bear market lows before this is over. As R.N. Elliott outlined 80 years ago, second wave retracements make most feel as though the bear market has returned. In fact, this is how it is described in The Elliott Wave Principle:
“Second waves often retrace so much of wave one that most of the profits gained up to that time are eroded away by the time it ends. . . At this point, investors are thoroughly convinced that the bear market is back to stay.”
Furthermore, Bitcoin permabears such as Roubini and Schiff should loudly renew their assertion that Bitcoin is a scam and/or a bubble. And these assertions should gain support and become louder as Bitcoin drops down to its ideal retracement target between $5,523 (.618 retracement) - $7,857 (.328 retracement).
In conclusion, we have been bullish on Bitcoin since December 2018, as evidenced in our articles and public interviews. However, our last public article on Seeking Alpha noted that this market was overheated and was about to experience a correction/pullback. That correction is now upon us and could last a couple more months.
Lastly, $4300 is the line between a potential larger breakdown and the resumption of this bull market. As long as this market remains above that level, we are looking up toward as high as a six figure bitcoin price in the coming years.
Note: While we are listed as being long-term bullish on Bitcoin, please recognize that we see a high probability for a larger-degree pullback to depress prices over the coming months before resuming the bull market rally.
Avi Gilburt is a widely followed Elliott Wave analyst and founder of ElliottWaveTrader.net, a live trading room featuring his analysis on the S&P 500, precious metals, oil & USD, plus a team of analysts covering a range of other markets. He recently founded FATRADER.com, a live forum featuring some of the top fundamental analysts online today to showcase research and elevate discussion for traders & investors interested in fundamental rather than technical analysis.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.