Produced by Jason Appel with Avi Gilburt and Ryan Wilday
Since September of last year, the Bitcoin technical updates we have provided have focused on various iterations in the expected “path to $100,000+”.
Before providing any further comments, I should note that I stand by my expectation of new all-time highs and that the price will climb north of $100,000. A more prolonged crypto bear market is a possibility, but the technical structure indicates that the price is much closer to a meaningful low than a sustainable high. There has been no compelling evidence in action since either of the April or November 2021 highs to indicate that Bitcoin is in for anything worse than a bull market consolidation.
The fourth quarter of 2021 provided Bitcoin holders, especially those with shorter time horizons, with much disappointment. After the initial “$100,000” article in September, Bitcoin: Do We Have Liftoff To $100,000?, the price formed a short bottom and rallied to new all-time highs in line with our expectations. Unfortunately, this breakout was unsustained and the big disappointment ultimately came from the aftermath of the failed November breakout as prices retreated near summer 2021 lows.
Since November, sentiment has plummeted and fear has risen amid bearish forecasts and wild speculation about what the potential regulatory actions might be and how these might negatively impact Bitcoin.
Last week, President Biden signed a long-awaited executive order on crypto, “Executive Order on Ensuring Responsible Development of Digital Assets.” And, although we saw some intraday volatility, this order did not trigger a larger sell-off.
The next regulatory issue to come (coming as of this writing on the evening of 3/13) is the 3/14 European Parliament vote on “Crypto Asset Markets” (MICA). The effects this vote may have on the price are beyond the scope of our technical work on Crypto Waves, but it is worth mentioning that previous regulatory actions aimed at Bitcoin over the years have not been able to reduce the price or the request in a sustainable way.
Where are we now?
While previous interpretations favored a bottom in place for wave 4, the most recent move below the September 2021 lows presents strong evidence of the broader wave 4 flat correction from the April 2021 high. referencing the December article, Bitcoin: Detour On The Moonpath, the conditions have been laid out for the various scenarios, and, unfortunately for Bitcoin bulls, the market seems to be on the more detoured path:
“[Breaking $39.6k]…opens the door for price testing and/or breaking summer lows to finally test the $24,000 region we were looking for in July.
Below is the accompanying chart to the December article for visual reference; the price follows the red path.
Thus, the preferred interpretation here is that the price is completing a nearly year-long bull market consolidation, after which the trend should resume higher.
In the very short term (see the BTCUSD 8h chart (above), BTC has yet to reach its biggest target wave 4 support between $24,000 and the summer 2021 lows (around 28, $8,000), nor has it advanced in such a way off the January 2022 lows to suggest a bottom in place. As such, more near-term weakness is reasonably likely. bottom at this pullback with the pullback would require a resounding and sustained break above $45,250.
Aside from those day trading Bitcoin, any further dips to $24,000 can be seen as an opportunity for continued accumulation and averaging dollar costs at lower prices. Don’t bank on the prospects of seeing Bitcoin north of $100,000 in 2022. It’s exactly from these types of sentiment conditions that we’ve seen previous big rallies set in.
“What if $24,000 doesn’t hold up?” »
While not expected, it has become important to hedge this outlook given Bitcoin’s detour to the less bullish side of our previous expectations.
First, a break below $24,000 does not in itself constitute an invalidation of the primary Elliott Wave pattern with price approaching a bottom in wave 4 of (3). A brief spike to $24,000 would not undermine the larger pattern as long as the price recovers quickly and resoundingly. However, a sustained break below $24,000 has strong ramifications for the longer term outlook. Such an outlook would “reduce” our expectations towards a diagonal ending pattern from the December 2018 lows.
The target support in this case becomes the region of $11,000 to $17,000. Objectively, we could no longer consider such a drop as a 4th wave in an impulsive move from the 2020 lows. But, as can be seen in the attached enlarged chart, Bitcoin has only had 3 waves since 2018, and therefore, a high is always expected to complete 5 waves. In this forward diagonal, $11,300 is strong support for the 61.8% log retracement of the entire rally from the 2020 low. This region needs to hold without any sustained breaks so that we can maintain any Reasonable bullish technical thesis pending a reset back to $3,000. This path is displayed in purple labels on the chart and, as can be seen, portends a rally above $100,000. However, if the price takes the purple path, it suggests an extended bear market after the next major high.
The takeaway here – of the various paths presented – is that while the outlook for near-term bearish action remains reasonably likely, continued pullbacks provide the opportunity for cheaper build-up for the journey to the next high. My current rating remains “Buy”, but below $30,000 I consider Bitcoin a “Strong Buy”.