Bitcoin BTC has powered past the psychological $60,000 level earlier today to reach a high of $63,933.Below is a screengrab from Thomson Reuters TRI Eikon Charts to give you a glimpse of the magnitude of the gains seen in recent weeks!
As recently as 23 January 2024, Bitcoin was at a low of $38,460, and today, in just about four weeks, it has rallied to a high of $63,933, a gain of over 66% from that low.
As regular readers of my blog at wavetimes.com know, I use a form of technical analysis known as the Elliott Wave Principle to determine the extent and likelihood of an upcoming move.In the chart above, we see a 5-wave rally from the far left.That 5th wave ended at the all-time-high of $68,999 in November 2021.This was followed by a 3-wave correction that brought the price of Bitcoin to a low of $15,479, seen in November 2022.
These eight waves together form waves 1 and 2 of a larger degree as per the Elliott Wave Theory.We are then in a mega wave 3 now.
While it is easy to label the historic waves using these handy notations, it is much harder to tell where the next move will actually end.Many beginning analysts think that merely by using Fibonacci Ratio analysis, they can profess to have the prophetic vision to forecast the extent of the upcoming move.My approach is different.I use these techniques to first determine the probability of the move reaching a potential target.
This will depend on where we are in the cycle.
As mentioned above, I have embraced the paradigm that we are in wave 3 of a higher degree.So, I put up a sticker in bold letters on my computer that I will NEVER trade AGAINST the third wave.
That means, all my trades will be from the long side.
Now, within the third wave, there are subsidiary waves.This is the beauty of the Elliott Wave Principle.Each of the impulse waves (waves that move in the direction of the trend) are made up of 5 smaller waves.So, if I take the third wave up from the $15,479 low seen in November 2022, I should look for 5 sub waves.
One of the reasons why Elliott Waves is such a powerful tool in the hands of the trader is because of the clues we get along the way.
These clues often enable us to anticipate the immediate next move.For example, when sub wave 2 was shallow, it told us that there were very few sellers and conversely, lots of buyers.That was a clue that the third wave could extend.According to the Elliott Wave Theory, one of the three impulse waves in the direction of the trend (waves 1,3 or 5) will travel an unusually long distance, i.e.it will be extended.
In the case of Bitcoin, the third wave is clearly extending.
As I already mentioned, this third sub wave will also be made up of 5 minor waves.It looks like we are in the fifth minor wave of the extending sub wave 3.While it is very hard to say where an extending wave will actually end, we can mark some targets along the way.
One of the targets lies between $68,280 and $68,500, as explained in the chart below.
Having identified a potential target for the ongoing sub wave 3, we should wait for the sub wave 4 dip to happen to position ourselves ‘long’ again in the direction of the current uptrend.
Remember, this is all still considered to be part of a mammoth wave III in the big picture.Good luck.
Ramki Ramakrishnan.
