Bitcoin fell to its lowest point since 2020, breaking through the support level. The drop could prove to be the lowest price seen since 2020, despite the fear it has sparked.
The last hope for Bitcoin bulls is the Elliott Wave expanding triangle, which could prove to be an extremely rare pattern.
Ralph Nelson Elliott’s Theory of Market Movement
If you ask most crypto investors, they will likely agree with the statement: We are currently in a bearmarket. According to Elliott Wave Theory guidelines, though, most of the recent year and a quarter of trading mostly sideways may be part one of the rare and powerful corrective patterns.
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Ralph Nelson Elliott discovered the Elliott Wave Principle in 1930. According to the theory, all markets follow the main trend through the five waves. The primary trend is also reflected in odd-numbered waves, which move along the primary trend. However, the corrective nature of even-numbered wave are those that go against it.
Are Bitcoin traders in an expanding triangle of trading? Source: BTCUSD on TradingView.com | Source: BTCUSD on TradingView.com
BTCUSD might be trading in an expanding triangular pattern as shown above. According to Elliott Wave Theory triangles are only visible immediately before the last move in a sequence. A triangle was created in the place of B waves during the bear markets, before the bottom.
The Bullish Expanding Triangle pattern
Triangles can contract, expand, descend, ascend, and even take on some “irregular” shapes. This expanding triangle, as seen above and below, should only be possible before wave five’s final impulse up. If that’s the case, the bull run could continue once the bottom of the E wave is put in.
Each subwave is a Zig-zag similar to wave two | Source: BTCUSD on TradingView.com
A expanding triangle has five waves, which sub-divide in ABCDE corrections. Waves C, D, and A are in opposition to the primary trend. While B and D are with it, they are waves that are sub-divided into ABCDE corrections. Each sub-wave is further divided into three wave patterns, called Zig-zag. These patterns, known as Zigzags, are more sharp and appear in waves two corrections.
An expanding triangle can have five corrections, in each direction. This makes it extremely confusing and frustrating. The most difficult market conditions are the best for expanding triangles.
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Expansive volatility can result from extreme uncertainty in either direction. Both trades are frequently stopped, adding frustration. The order books have become very thin by the time the pattern ends and are easily overwhelmed. The bull run continues because of a determinedly bearish sentiment that pushes prices quickly up. FOMO, the chase and FOMO are necessary to create wave 5.
Bitcoin could still have Wave Five
There is no way to know if it is correct or whether Bitcoin has just entered (or completed) wave 4. According to Elliott Wave Theory, this problem can be solved. It is important to understand that triangles are only present before the end of any sequence. This helps increase the probability of the expanding triangle being true. It is important to be able to identify the features of each wave.
Corrective waves are ABCDE or ABCDE corrections that go against the primary trend. An impulse wave up is between the corrections in a five-wave, stair-stepping fashion. A new trend begins with wave 1, after the bear market bottom. Wave two often follows wave one’s pattern of sharp corrections in a Zig-zag fashion.
A bear market will move below the zero line on the MACD | Source: BTCUSD on TradingView.com
A lack of a low new level creates market confidence, making wave three one of the most powerful and prolonged of all. Wave four tends to move sideways, and is not as severe as the wave 2 correction. Elliott explained that wave 4 is the end of the trend and represents market uncertainty. Both wave two and wave four tend to bring the MACD back down to the zero line before reversing higher – a setup clearly depicted above.
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Wave five usually matches wave one in length and magnitude when the hesitancy is over. Wave five could be extended in a similar fashion to wave 3. However, this correction was so severe that it took a very long time. The expanding triangle pattern would have created the perfect shakeout for both the bullish and bearish sides.
Here is a 🧵 on my full Elliott Wave analysis on #Bitcoin and why I don’t believe there is a bear market – and why I expect the last leg up any day now.
— Tony “The Bull” Spilotro (@tonyspilotroBTC) May 15, 2022
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Featured Image from iStockPhoto. Charts from TradingView.com