Bitcoin (BTC-USD) has finally broken below $30,000. This is in line with what I was expecting, and we are now approaching important long-term resistance levels. In this article, I review where I believe Bitcoin is heading in the short and long term, and point out important levels of resistance that should not be broken if we are to understand that this is just a correction in a larger bull move.
If you are afraid about owning/buying Bitcoin at this time, I suggest you wait until the bottom is more clearly in. Even when Bitcoin bottoms, history suggests it won't explode to the upside just yet.
Bitcoin has broken below the $30,000 level, and if you remember my latest analysis, I was looking for this to happen eventually.
This is the same chart I posted over 5 weeks ago, and Bitcoin has indeed fallen into the target box. My large degree Elliott Wave count is that this is a wave 2, following wave 1 that was completed back in April 2021. Although Bitcoin did make a higher high, I consider this a corrective B wave. Therefore, it has been clear to me for a while that we are in the C wave, and this C wave had to at least break below the low we made in the A wave. I've always thought the 0.382 fib extension, which is the 61.8% retracement, was a good target for this area.
Now, let's zoom into what's happening right now:
What we see here is the five wave structure forming since the B wave top. During wave iv, Bitcoin was trading in a channel, and once it finally broke below it, the sell-off accelerated. We have a clear 5 wave structure now forming in this last wave v down. Wave 3 has hit the 1.618 ext, so I am expecting somewhat of a reversal here, and then a final move down towards the 2 or even the 2.618 ext, which means $24,000-$19,000.
This is as low as I expect BTC to go, and any lower would be problematic.
There are two key areas of support below for Bitcoin that shouldn't be broken or should only be broken briefly.
First off, the long-term 200-day moving average.
This chart is a bit dated, and you can find a more up to date one here. The key takeaway here is that the 200 weeks MA has traditionally acted as a strong level of support during bear markets. This metric currently stands at $21,770, so while Bitcoin can go near, and even below it, it shouldn't go much further.
The other key level of support is around $20,000 which is where Bitcoin topped in 2018. Breaking below this would indicate a change in sentiment, and it would also invalidate this larger degree wave count. Wave 4, cannot go into the territory of wave 1.
Last, and certainly not least, let's review the famous halving cycle chart, and see where we are at.
This chart shows how Bitcoin reacts to its halving cycle. In the past, we have seen Bitcoin enter a bull run after the halving, and then enter a bear leading into the next halving. This chart breaks Bitcoin up into 3 parts, a very clear bullish period (green), a more defined downtrend (red), and then a steady recovery (blue). The bottom is normally reached between the red/green boxes.
This fits perfectly with what is happening to Bitcoin now. We topped in green, this is where I labelled the wave 1, and we have been in the corrective red since. We are now finally falling in a more accelerated manner, and as the chart shows we should reach a bottom fairly soon. Interestingly, this chart also predicts a bottom of around $19,000. This wouldn't exactly signal the end of the bear market, but it would signal a bottom. After that, we can expect Bitcoin to carry out a slow move up until it enters another bull phase in 2024.
These are scary times, even for those of us aware that these price levels were in the cards. This is exactly what a capitulation event should feel like. The bottom line here is that you should manage risk accordingly. We have important support levels that shouldn't be broken, and you can use these as stops.
Also, don't feel like you have to catch a falling knife, there should be plenty of time to accumulate Bitcoin during the next few months.
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Disclosure: I/we have a beneficial long position in the shares of BTC-USD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.