BTC: Nap Time Is Almost Over

BTC: Nap time is almost over

In last week's article we noted that price was digesting its breakout above the May highs and in many ways, the December and January highs, as this recent action has been the first sustained activity above $110k~

At this point price is going on nearly 2 weeks of consolidation below the new all-time high struck on 7/14 but more importantly this consolidation is taking place above $110k. In trending markets these consolidations can generally be viewed as constructive developments as a sort of "correction" in time rather than price which typically leads to the resumption of the trend. That is to say higher prices are still expected.

The particular price action from the 7/14 high is quite characteristic of a 4th wave which aligns with the micro interpretation that we've been tracking. On lower timeframes the real question here is how many sets of 4-5s (in Elliott Wave parlance) we have left to complete this move up from the June 22nd low. 

My primary count considers that our next run to new highs, expected to transpire soon (within the next week or two) can fulfill the completion of wave iii off the June 22nd lows. That entails another corrective pullback back into the $115k-$120k zone for a wave iv followed by a final push up to the upper end of the target zone, the $135k region for wave v.

In the more conservative view however, I can make a very reasonable argument for one more high north of $125k completing all of the move from the June 22nd low as shown in purple.  This consequently would print a sufficient number of waves from the April low and at last from the 2022 low - to very reasonably consider the development of a higher timeframe top, ie a potential completion to the cycle from the 2022 low.

However, we should also note that a minimum number of waves does not in and of itself provide high quality indication of a completed trend. For that we'll need to see some breaks of support which we can outline in next week's update assuming new all-time highs have been reached, and a subsequent update if it takes until later into August for new highs to develop. For now, I would need to minimally see $110k resoundingly broken to consider a top.

I will note that outside of Elliott Wave analysis, other indicators providing measures of sentiment are nowhere near what's been seen at other important cycle highs. Specifically, I'm referring to the MVRV Z-Score https://www.bitcoinmagazinepro.com/charts/mvrv-zscore/. That said, considering limited history of major highs in Bitcoin, I would not put a ton of weight into this indicator alone but want to note that there's a reasonable case to make still for Bitcoin to run to $200k, even if not being consider as the primary perspective at this moment.

Overall, I see the upcoming highs as an opportunity for trimming some longer term long positions with a willingness to get back in should we see evidence of a more direct run higher developing. Specifically, I'm referring to the blue potential which would entail a bigger run to $200k+ developing and should we see price get a sustained break above $140k, a direct move to $200k becomes a reasonable prospect with support in the 125k-$135k zone. As I mentioned last week, even if such a rally develops, meaning a move to $200k without breaking back below the June 22nd low, the more high odds potential favors a multi-day to multi-week pullback to the $110k-$115k region first (from $130k~) and then breakout. 

On the other hand, assuming BTC does complete the 2022 cycle in the coming weeks, the evidence we'll need to validate this case will be a break below the 6/22 low (98.3k) followed by a break below the April low $74k. Given that our confirmation of a high in place for the cycle likely requires a 40+% pullback risk management in the current region becomes key.

I'll conclude with a warning to mindful of risk. The past few months have been outstanding for Bitcoin holders but we'd be wise to recognize that the current euphoria will not permanently last. As has been discussed before, while this cycle may have a decent amount of upside left, odds are strong that the majority of the move from November 2022 is in hindsight and very large positions would be wise to consider trimming some profits, trailing some stops, and reducing some risk as price pulls towards key targets.