Sentiment Speaks: Bitcoin Is Going To $150,000


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Summary

We've been looking for six-figure Bitcoin since December 2018 and may finally be on our way.

The current correction in Bitcoin is a chance to buy.

Despite this strong bull, we share key levels so Bitcoin traders and investors know what must hold for this rally to continue.

Produced by Ryan Wilday, along with Avi Gilburt

While many have been trying to apply fundamental analysis to the crypto world with quite varied and inconsistent success, our Fibonacci Pinball method has helped us navigate Bitcoin's machinations quite well through the years. In fact, there has been nothing I have seen that has better and more accurately tracked the price action in this market.

After expecting a top near $18,000 in late 2017, we had stated that, ideally, Bitcoin should see a sizable retrace and hold the $3000 support region in the subsequent bear market. This level was identified as the log 50% retrace of the preceding third wave. And that was very near the actual bottom.

While many of you may not be familiar with what our Fibonacci Pinball methodology of Elliott Wave analysis is or how it works, Avi Gilburt wrote a six-part series outlining our methodology a number of years ago which you can review here:

This Analysis Will Change The Way You Invest Forever - Part 1

This Analysis Will Change The Way You Invest Forever - Part 2

This Analysis Will Change The Way You Invest Forever - Part 3

This Analysis Will Change The Way You Invest Forever - Part 4

This Analysis Will Change The Way You Invest Forever - Part 5

This Analysis Will Change The Way You Invest Forever - Part 6

Once Bitcoin bottomed in the $3,000 region in December 2018, we began a new bull market that is now more than two years old. It started with a rally to $13,925 in May 2019, which we call wave one. Wave two took us down below $4000 in March 2020, without breaking the December 2018 low. We are now a massive third wave off that March 2020 low. This bull phase will not be over until the fourth and fifth waves are complete.

On Oct. 12, 2020, I issued a buy signal to my subscribers on EliottWaveTrader. Bitcoin traded at a value of $11,299 at the time of the signal and had been largely sideways for four months prior. This signal, derived by studying long-term data in Bitcoin, suggested that Bitcoin was going to start a multi-week, and potentially a multi-month run. Given that Bitcoin was not far under its all-time high, a break over that high was likely.

Since the last long signal in October, we've seen a high of $41,986, almost four times higher in value. The signal is still long, and as long as Bitcoin remains over $20,300, I remain bullish. I call this level the "bull / bear market pivot," and is derived by calculating the log 50% retrace of the move off the August low at $9800. This level should not be breached in a strong third wave.

Bullish sentiment began to percolate on approach to Bitcoin's third halving on May 11, 2020, presumably driving it higher. Halving is where Bitcoin's inflation rate is cut in half via a 50% cut in rewards for miners.

Further, signs of institutional buying continued the rise in bullish fervor. Family offices and hedge funds have slowly become more involved in the crypto trade over the last few years. However, large purchases by Square (SQ) of 4,709 Bitcoin in October and MicroStrategy's (MSTR) outlay of most of its company treasury into Bitcoin gave bulls dreams of further corporate accumulation. Even PayPal (PYPL) fueled excitement regarding crypto adoption by launching crypto payments as part of its retail service late last year.

Where will this all lead?


Finally a Correction

Zooming in a little, we've seen Bitcoin in a sideways to downward correction since it struck a high at $41,986. So, while you may have watched Bitcoin take off, and want to buy, but didn't know where to enter, this is your chance. As long as it remains over $20,300, then this correction is a reasonable and healthy consolidation within a larger degree bull market.


What's Next

As stated in many articles on Seeking Alpha, since the bottom in December 2018 at $3100, our team has expected Bitcoin to start a multi-year climb into six figures prices. Now that Bitcoin has broken well over $20,000 we again see six figures as a target in the coming years. In fact, the ideal target based on current price action is $150K.

Typically, we target our fifth waves at the 200% extension of wave one starting at wave two. However, our third wave is now setup up to extend past its normal target. We expect it to top in the third close to $85,000 with our fourth wave should pull back $30K. We can then derive the wave 5 of 150K with a projection of the log return of wave one, our 2019 rally. Typically wave one and wave five have the same percentile return.


But Watch Out

Despite our call for $150K Bitcoin, we must not ignore any reasonable bear case. Elliott Wave analysis notes that false breakouts are common in many markets and particularly in crypto. According to the Elliott Wave theory, false breakouts take the form of a B wave that breaks over previous highs but leads to a C wave back into the previous range, or lower.

Our concern is that the March low was very low for an impulsive setup, and some legs of the rally off the March low appear to be corrective in structure. These artifacts of structure do fit in what is called an ending diagonal to $150K but equally fit the B wave scenario.

The bottom line is that from here on out, Bitcoin must hold over $20,300 or the B wave top is in play. Should it trigger, we'll watch for a C wave down to the $3K-$10K region. We don't believe that traders should concern themselves with this scenario until support breaks. Yet we see many traders fail to respect support with risk management tactics when such action is needed.


Strap Yourself In

Even if the ugly B wave scenario never comes to be, we should not expect a straight run to $150K. This massive move in Bitcoin means that smaller corrective retraces will still feel large. On our rally to $150K we should see a wave 4 of this third wave, and a larger degree 4th before the fifth takes us to $150K.

As of the writing of this article, we may have started the first fourth wave pullback and support is at the $20,300 highlighted above. We don't expect to see anything less than $30K in this retrace. That's nearly a 30% correction which is certainly scary enough for newer crypto traders to get knocked out of their positions. Expect more of these shakeouts to occur between now and our final top.


Ryan Wilday hosts the Crypto Waves service on ElliottWaveTrader.net.


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