BTC has been correcting for almost a year, especially since the April 14, 2021 high. This fix may have now expired.
long term btc correction
BTC started a long term five wave upward movement in December 2018 (white). The most likely scenario shows that wave three was completed on April 11 and BTC has been correcting inside wave four since then.
Because of the concept of reversal, waves two and four must differ in either length of time or price. Since the waves have the same length (263 and 281 days), it makes sense for them to differentiate their retracement levels.
Wave 2 was deep, reaching the 0.86 Fibonacci retracement level (White). With this in mind, it makes sense for the wave four to be shallow, ending at the 0.5 Fib retracement level (black), which has already been reached.
cryptocurrency trader @24kcrypto Posted a BTC chart, in which price is completing a longer term fourth wave triangle. He also indicated that the RSI has given a bullish signal that occurred earlier during the March 2020 bottom.
While it looks like BTC is in a longer wave four, there still appear to be several potentially valid sub-wave calculations.
The three most likely calculations are presented in the image below.
Sharp correction (black) will indicate that another low is in store. A sideways correction (yellow) indicates lower but BTC will continue to consolidate, while a red path indicates a downside.
Below, these three calculations will be analyzed one by one to decide which is most likely. For our previous wave count analysis, click here.
rapid improvement
The most bearish possibility is that BTC is in an irregular flat correction. This would mean that the ratio of waves A:C would be 1:1.61, eventually reaching a low of $12,345.
Sub-wave counts shown in black indicate that BTC is in sub-wave three. In this case, it will break through the channel, validating it as resistance before resuming its downward movement.
Furthermore, this would not align well with the previously discussed concept of reversal, as wave two and four retracements would be very similar in length, both falling to the 0.85 Fib retracement support level.
Finally, the low at $12,346 will break the wave with a higher higher (red line), hence providing an invalid correction based on EW theory.
sideways improvement
Neutral prospects suggest that BTC is trapped in a fourth wave triangle.
In this scenario, BTC will rise to $55,250, before falling again to the 0.618 Fibonacci retracement resistance level. The entire movement will complete a symmetrical triangle, leading to the possibility of an eventual breakout.
Apart from the fact that the correction can last for around 400 days, this likely doesn’t break any EW rules.
repair is complete
The last and most likely possibility suggests that BTC has completed its long term wave four inside the current ascending parallel channel. In this, the waveform A:C has an exact 1:1 ratio, which is the most common of such improvisations.
This will effectively complete the ongoing flat improvement.
The main issue with this count is the short-term movement. Since the January 24 lows, the ensuing bounce looks more like a three-wave structure than a five-wave structure.
This could mean that BTC will move slightly lower near $34,000, but will still respect the channel, or that the triangle possibility mentioned earlier will be exhausted.
Short-term movement over the next few days will be crucial in determining which of these possibilities will move forward.
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