Seeking Alpha
2024-07-10 11:52:02

Bitcoin: Bottoming Or Breaking? (Technical Analysis)

Summary Bitcoin is consolidating in a corrective pattern before advancing to 100k. The recent drop appears to have been the c-wave down of the abcde Elliott Wave pattern. Fearish market sentiment may indicate bottom for recovery rally. It's been my position since March when Bitcoin (BTC-USD) reached an all-time high near $74,000 that the leading cryptocurrency would consolidate in a sideways corrective pattern before advancing to 100k and beyond. In spite of recent short-term weakness, my analysis is that this continues to be the correct outlook and that dips remain buying opportunities. The recent drop appears to have been the c-wave down of the abcde Elliott Wave sideways triangle pattern., TradingView Note that the recent low only exceeded the May 1st low by 5%, a tiny movement in Bitcoin terms. Price appears to be recovering now. While it's likely that there are d and e waves to come in the sideways pattern before the next big rally ensues, this is probably the best entry point we are going to see. Above 60k should confirm this analysis. The Bitcoin Fear/Greed Index shows that fearish market sentiment was at about these current levels at the end of the last such sideways correction, leading to the last big rally. Bitcoin Fear and Greed Index, Sentiment should be fearful enough to put in a bottom here and allow for a recovery rally back near the highs of the range. Here's the daily chart., TradingView Note that back in September, when sentiment was in its current bearish range, price also corrected to the convergence of the 50 and 200 day EMAs (blue and red, respectively) and then took off. It's in a similar position now. We also see that in August/September daily RSI level corrected back into its green support zone and put in a bull divergence, as it is doing now. On the bearish side of the ledger, we have a trendline break and also a drop back into the green trend channel after breakout out to the upside. These, however, are consistent with a bullish sideways corrective period. Now on to the weekly chart:, TradingView Here we can see that weekly RSI corrected to the same level as in September. This is a solid technical reset without much price damage. I'm placing the wave count now as 4 of 3. The next bullish impulse wave will be 5 of 3, with 5th waves typically being the strongest moves in Bitcoin bull markets. Monthly chart:, TradingView Note that within bull moves, the 10 month SMA in blue has been key and that level is being tested now. If price does dip back into the 55-53k zone, then I would have to re-evaluate this analysis and consider other scenarios. Above 60k and we can become more confident that we are on track for a resumption of the long term bull trend. It may be that an additional period volatility and churn within the range may be needed to finish this corrective pattern, lasting about 2-6 weeks.

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