Any Bitcoin price prediction is just a guess with no basis to make the prediction. The stock-to-flow model which was once the most cited reason for expectations of higher prices has failed, making technical analysis, on-chain signals and statistics the best chance to find future price targets.
Elliott Wave Theory is a methodology for forecasting technical analysis discovered in the 1930s that is based on identifying extremes in investor psychology in conjunction with distinctive price behavior. With Bitcoin and other cryptocurrencies so susceptible to the ebb and flow of investor sentiment, here’s what Elliott Wave Theory suggests about what’s to come for the Bitcoin price.
A brief history of BTC price action
Bitcoin’s price index chart begins in late 2010, with the first-ever cryptocurrency trading for just pennies on the dollar. By the end of 2011, the price per BTC had increased by more than 60,000%. Before the end of the year, it lost 94% of its value.
From the low of about $2, another bullish impulse added another 60,000% ROI to the peak of 2013. Another steep corrective phase followed, causing the cryptocurrency to decline by 86%.
What followed was perhaps the most talked about bull run since the dot-com bubble, when Bitcoin hit nearly $20,000 per coin in 2017. By now, we can see that extreme price swings and swings in investor sentiment lead to boom-bust cycles in cryptocurrencies. Bitcoin found another bottom of $3,000 in 2018, which will form the basis for the rest of the analysis.
The first wave ever and the history of Bitcoin price | Source: BTCUSD on TradingView.com
An Introduction to Elliott Wave Theory
First discovered by Ralph Nelson Elliott in the 1930s, Elliott Wave Theory is a basis for explaining how markets grow over time. The motivational wave in EWT is an example of markets moving three steps forward and two steps back.
These steps alternate back and forth between growth and corrective phases. Motive waves are made up of five waves in total – with odd-numbered waves moving in the direction of the primary trend and even-numbered waves moving against it.
While corrective phases result in a drastic fall in value, incremental growth always remains in the primary trend direction. Waves, both impulsive and corrective, both appear in varying degrees and timescales.
For example, a five-wave impulse on the daily time frame could be just a small portion of a multi-century Grand Supercycle. Figuring out where Bitcoin is in its various wave cycles and degrees can help predict future price action.
Bitcoin price prediction scenarios based on possible wave counts | Source: BTCUSD on TradingView.com
Review of the current market cycle, according to EWT
Each wave in an impulse has unique characteristics that can help an analysis decipher where an asset is in a general motive wave. After the bear market bottom in 2018, crypto had a clean slate to rise from. In 2019, Bitcoin rose to $13,800, showing the market that there was still life in the speculative asset.
Almost all of the rally bounced back, which is a common feature of a wave 2 correction. Corrections tend to alternate between sharp and flat corrections. Sharp corrections are shown by zigzag lines. Wave 2 behaved like a zigzag and there is no denying that the March 2020 Black Thursday collapse was a sharp correction.
Wave 3 in Elliott Wave is typically the longest and strongest wave, characterized by much greater participation than Wave 1. The crowd begins to pile up at this point. Bitcoin received national media attention when it hit a new all-time high during this wave. From there it gets more confusing.
Elliott Wave practitioners are divided if BTCUSD has already completed its wave 4 and wave 5 phases, or if wave 4 is still underway and wave 5 is yet to come. Using these two scenarios, some targets can be considered.
Things could get extremely bearish for Bitcoin if the cycle has ended | Source: BTCUSD on TradingView.com
The bearish and bullish scenarios and targets
In the bearish scenario, a truncated wave 5 ended the Bitcoin bull run and sent the crypto market into its first true bear phase, with wave 5 of V completed and done, ending the primary cycle (pictured above).
Completed bull markets often return to wave 3/4 territory when the motivational wave has completed. Bearish price targets take the negative Bitcoin price forecast from anywhere from $9,000 to as low as $2,000 in a full-blown market collapse. A bigger catastrophe in the stock market and the housing market could eventually do the trick by drawing all remaining capital out of crypto.
The bullish scenario is much more positive and fits better with what Elliott Wave Theory calls “the right look” and good counting. In the bullish scenario, Bitcoin is in the final phase of a extensive flat correctionand once the sentiment and price extremes are over, the top cryptocurrency will quickly move into another bullish price extreme and sentiment reversal much faster than anyone has prepared for.
BTC appears to be in the final stages of an expanded flat wave 4 correction | Source: BTCUSD on TradingView.com
Using EWT to make a Bitcoin price prediction
The magic behind the Elliott Wave Theory and why it influences growth in financial markets is due to its relationship with Fibonacci numbers. Fibonacci numbers are based on the Fibonacci sequence, which is related to the golden ratio. The Fibonacci sequence reads 0, 1, 1, 2, 3, 5, 8, 13, 21 and so on.
In Elliott Wave Theory, there are 21 corrective patterns ranging from simple to complex. A motivational wave is 5 waves up, while corrective waves are 3 waves down, making a total of 8 when you add them up. A fully realized impulse wave with all subwaves is 21 waves higher, while corrective phases are a maximum of 13 waves lower. Each Fibonacci number from the sequence is included in some capacity.
Corrections also stop at Fibonacci retracement levels and impulses reach Fibonacci extensions as price targets. Wave 5 is usually equal in size to wave 1 or wave 3. If wave 5 is extended, and it often is in crypto, the target of wave 5 could be anywhere between 1,618 of wave 3 or 1,618 of the sum of wave 1 and wave 3 fall.
Bitcoin price reached the 3.618 extension from the bottom of the bear market, making it possible for the top cryptocurrency to overshoot again. On the downside, a price target of 1,618 would put BTC’s peak for this cycle somewhere near $96,000 per coin, while another 3,618 extension could take the top cryptocurrency all the way to $194,000 per BTC.
This makes the Bitcoin price prediction using EWT somewhere between $100,000 and $200,000 before the cycle is over. You can view this Bitcoin price prediction in real time by adding the idea to your favorites Trade view.
A possible Bitcoin price prediction based on Fibonacci extensions | Source: BTCUSD on TradingView.com
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Featured image from iStockPhoto, charts from TradingView.com
Its like you read my mind! You appear to know so much about this, like you wrote the book in it or something.
I think that you can do with a few pics to drive the message home a bit, but other
than that, this is great blog. A fantastic read.
I will certainly be back.