Bitcoin Monthly - wave 4 deeper correction to come

2021年9月27日

This is a long term count of BLX on the monthly time frame - using Elliot wave and indicators

This is the 5th and final wave of the largest degree and we have just topped wave 3 of one lessor degree and are in the middle of a wave 4 correction. Many ellioticians claim that 1) wave 3 has not topped yet or 2) wave 3 has topped but the wave 4 correction is complete and we are ready to climb back up to the moon. This provides an alternate perspective in which wave 3 has topped and wave 4 is in a correction that has not completed as of yet. If you look at the larger degree wave 4 it was a very deep correction down to the .786 Fib level on the weekly time frame and it perfectly bottomed on the 200 weekly moving average (expressed as the 50 on this time frame). The same happened with the wave 2 of lower degree (white 2 on this chart within the larger degree wave 5), where everyone had assumed it bottomed and then one final push down (coinciding perfectly with the March 2020 stock market crash). That wave 2 also pushed below the .786 and even down to the .854 Fib retracement with a final candle body close on the .786 Fib and the 200 weekly moving average.

Since history shows that Bitcoin likes to correct in very deep wave 2's and 4's, assuming this is a wave 4 correction we are in, the odds are that a deeper correction is coming and that would send price down to the 200 weekly/50 monthly moving average. That level is also where the .786 Fib level is sitting and happens to be the bottom end of the channel on this monthly log chart. Price is roughly 15,000 USD and if it were to play out in a similar fashion as both wave 2 of smaller degree and wave 4 of larger degree, then the time target would be somewhere around spring 2022.

The fact that sentiment is overwhelmingly bullish, not just in crypto but in every asset (everything bubble) only seems to add weight to this thesis. The stock market is on the verge of a multi year bear market that may have started over the last two weeks. If the S&P and other major indexes turn down over the coming weeks, failing to make new highs, then it is very likely that wave 3 down in the major stock market indexes has begun and that will add major weight to this scenario playing out in Bitcoin.

Many people believe that Bitcoin is an uncorrelated asset, and in the past years I would have agreed, however looking at how March 2020 coincided perfectly with the end of wave 2 on Bitcoin, the evidence is now to the contrary. Fundamentally speaking, many institutions have now adopted Bitcoin and as it is considered a risk asset, it is very likely to continue to sell off once investors switch to a risk off mindset. The testing of this "new/change in correlation" theory may be at hand very soon.

Other factors that add weight to the wave 4 deeper correction are:

1) Volume has been declining during this entire rally in the traditional/legacy exchange markets but most notably it topped on GBTC (I say institutions have driven this rally since 2020 through vehicles such as GBTC) on January 8, 2021 and has been in steady decline especially during this B wave "dead cat bounce" on the monthly time frame on GBTC.

2) OBV on this monthly chart has put in a double top and is now in decline yet again which is suggestive of weakness despite the activity in price

3) RSI has topped and is now in decline, in the past, once this divergence occurs, the depth of the corrections are significant. The only counter to this is, all past instances of tops on the monthly time frame have produced double tops in RSI, where this time we have only one.

4) Willy has also peaked and is now declining, which historically has followed with price declining in a much deeper correction until willy becomes oversold and resets.

5) MACD has crossed on the weekly and provided a fake-out/breakout which has now crossed back down again (exactly like it did during wave 2 of 5) and now the monthly chart looks as though it may produce a MACD break as well.

Historically after such a massive run to the upside, and then momentum through the various indicators including MACD turns down, it is most likely that the correction is just beginning. Considering these factors and that we are likely in a wave 4 correction before the final leg up in Bitcoins 5 wave move, at the exact time that the long overdue stock market crash is upon us (needs confirmation over the next weeks), the odds are highly suggestive that this correction is not over.


Should the next few weeks play out in a way that confirms the stock market has topped and Bitcoin follows in right fashion, then I will post a weekly chart to break down further why this was apparent and how this wave 4 could potentially unfold in the coming months.

Many traders are overexposed to Bitcoin and other assets, in general retail traders and household exposure is at all time highs, significantly higher than any other time in history. This overexposure can cloud judgement and I have noticed this trend among crypto investors as a whole and this includes many professional service providers. It never hurts to take profits and increase clarity and neutrality when observing the market and especially at a time where risk has never before been so high within the broader and crypto markets.

Good luck!