Bitcoin hacked support It fell to the lowest prices seen since 2020. However, despite all the fear this drop has caused, it may be the last bottom before the top cryptocurrency continues its rally.
This is why the extremely rare Elliott wave expanding triangle could be the last hope for Bitcoin speculators to reach new highs before the bear market.
Ralph Nelson Elliott and his theory of how markets move
Ask most cryptocurrency investors and they will probably agree: We are in a range alcohol market. However, based on the guiding principles of Elliott Wave theory, the past year and a half can often be part of a powerful, confusing, and rare corrective pattern.
Related reading | One Coin, Two Deals: Why Bitcoin Futures Don’t Match Instant Signals
The Elliott Wave Principle was first discovered by Ralph Nelson Elliott in the 1930s. The theory believes that all markets move in the direction of the primary trend in the same five wave pattern. Odd waves move with the primary trend as well, while even number waves are corrective in nature and move against the trend.
Is Bitcoin trading in an expanding triangle? | Source: BTCUSD on TradingView.com
In the above chart, BTCUSD is likely to be traded in currency expanding triangle. In Elliott Wave Theory, triangles of any type appear just before the final movement of the sequence. During a bear market, a triangle appeared in place of wave B before collapsing to the bottom of the bear market.
Identifying the expanding ascending triangle pattern
Triangles can contract, expand, descend, ascend, and even take on some “irregular” shapes. The expanding triangle shown in the image above and below should theoretically only occur before the last fifth wave rushes up. If so, the uptrend may continue once the bottom of wave E is entered.
Each subwave is a Zig-zag similar to wave two | Source: BTCUSD on TradingView.com
The expanding triangle has five waves subdivided into ABCDE retracements. Waves A, C, and E are against the primary trend, while waves B and D are with the primary trend. Each subwave is divided into three-wave patterns called zig-zag. Zigzags are sharper and more commonly appear in second wave corrections.
The fact that the expanding triangle has five of these Brutal corrections In two different directions makes it particularly confusing and frustrating. Expanding triangles only form under the most unusual market conditions.
Related reading | Bitcoin Bear Market Comparison Says It’s Almost Bull Season
High uncertainty leads to wide fluctuations in both directions. Both sides of the trade were repeatedly stopped from deals, which added to the frustration. By the end of the form, order books are weak and easily overcome. The bearish sentiment is quickly compressing prices causing an upward breakout of the pattern and the continuation of the uptrend. Chasing and FOMO create the necessary conditions for the fifth wave.
Why Bitcoin Could Still Have a Fifth Wave
The only problem is that there is no telling if this is the correct pattern, or whether bitcoin is in (or may have just completed) the fourth wave according to Elliott waves theory. knowing that triangles They only appear before the final movement of the sequence helps improve the viability of this expansion triangle change. However, it is important to understand the characteristics of each wave.
Corrective waves result in ABC or ABCDE corrections (along with some more complex corrections) that move against the primary trend. Between the corrections there is a bullish impulse, in a five-wave upward ladder pattern. distance Market bottoming out, a new trend appears beginning with the first wave. Often the second wave is a sharp correction in a zigzag fashion that corrects most of the first wave.
A bear market will move below the zero line on the MACD | Source: BTCUSD on TradingView.com
The lack of a new bottom creates confidence for more market participants to join, making the third wave the strongest and most extended ever. The fourth wave usually moves sideways and lacks the same intensity as the second wave correction. Elliott said that the fourth wave represents indecision in the market before the trend ends. Both the second wave and the fourth wave tend to bring MACD Roll back to zero line before roll back to top – setup shown above.
Related reading | Bitcoin Index hits historic low not seen since 2015
When the frequency ends, the fifth wave usually matches the length and magnitude of the first wave. But after such a long and vicious correction of the fourth wave, any fifth wave has the potential to extend similar to the third wave. If that was the case, the expanding triangle pattern created a perfect jolt to both sides of the market.
Here 🧵 in my full Elliott Wave analysis about # bitcoin And why I don’t think there is a bear market – and why do I expect the last leg any day now.
– Tony “The Bull” Spilotro (@tonyspilotroBTC) May 15 2022
Follow TonySpilotroBTC on Twitter or join TonyTradesBTC Telegram Get exclusive daily market insights and technical analysis education. Please note: The content is educational and should not be considered investment advice.
Featured image from iStockPhoto, Charts from TradingView.com