Bitcoin price analysis provides some evidence that a new uptrend may be in effect. However, recent price action does not show the impulsive surge that normally follows a trend change. The analysis below lays out the evidence on the chart and forecasts the likely paths price may take.
Since reversing from its low at $442 (Bitstamp) price has climbed above, and maintained, a mean price above $500. Even so, price action to the upside has been limp, and volume of trade has been lower than similar junctures in the past.
Overall it would appear that downside is incomplete with the decline still being able to punch lower. The chart below shows Fibonacci extensions of wave a reaching all the way down to $160.
However, an interesting dilemma is posed by the fact that decline from $680 (top of wave D or wave 1) had reversed at 1.618 of the first wave down, which was also a low in excess of 0.618 of the entire length of wave D (or wave 1). Despite a slow start, there may be reason to believe that we are at the start of a gradual advance.
The advance from $339 (11 April) to $683 (1 June) is clearly a three wave structure, hence the preference, to date, given to the interpretation of the advance as a corrective D wave. The subsequent decline to $442 (18 August) would then represent the ongoing decline (in wave E). However, as printed on the chart, the decline from the top of wave D down to $442 has a distinct 3-3-5 wave structure. Also, it had reversed at approximately 62% of the length of wave D.
The combination of a three wave advance followed by a three wave decline to 62% of the length of the advance is a classic Elliott Wave combination, namely the first two waves (annotated in blue) of an advancing diagonal wave.
Should this be the case then the Bitcoin price chart is now at the start of an advancing wave 3 and, provided this is just a slow start, we should witness, over the coming weeks a relentless advance to $880 – the price from which BTC/USD had been so violently rejected the last time it attempted to cross it in the first two weeks of this year.
To get there, price must now strike out for $590, the top of the current decline channel, as well as the price level of the 1.618 Fib extension of the first wave up from $442. Once achieved, it could be expected that price would react with a correction at $590, before crossing the decline channel upper trendline and to successfully colonize $680 – another scene of failed diplomatic relations in the past.
This must all happen quickly in order to confirm an advancing trend. Some sideways consolidation always features in the Bitcoin chart, but outside of such structures Bitcoin needs to draw long green candles. Mealy-mouthed advance punctuated by stops-and-starts while market participants turn their big toe in the sand will be the sign of the Bear – a corrective advance – guaranteed to slam down to current levels sometime in the future.
Last week’s analysis anticipated a catalytic spark based on Coinbase’s announcement that they were purchasing significant amounts of Bitcoin on Friday 22 August. The day came and went and traders’ eyes turned to raisins staring at an immobile chart.
Unless we see advance above $530 today (Wednesday 27th August), the price chart is still pointing down. Even with an advance to $590 there is still the possibility of reversal from that level and return to the bottom the decline channel. Some esoteric models of price determination confirm this, most significantly the New Moon of 25 August, which (in the Bitcoin chart) habitually sees a run-up to 1.618 of the previous wave, followed by a price decline. Not necessarily to new lows, yet the pattern is established for those interested readers who may wish to investigate.
As with almost all moments of change, trend change is clearly evident in hindsight. From a trading and forecasting perspective we have no choice, therefore, to assume a trend to be in force until its wave count is invalidated. Unfortunately, the current A-B-C-D-E count (and we’re in wave E) can only be invalidated by a breach of the decline channel to $600 and above.
Analysis updates are posted in this article whenever significant market moves or events occur, so be sure to check the article over the next week for interpretations of any clues that price action may give us.