Bitcoin's Market Cycle Explained Through Elliott Waves

2021年12月15日

This is an educational post on Elliott Impulse Wave structures, and how the theory can be applied to Bitcoin's chart, in order for us to identify the overall market trend.

Disclaimer: This is not investment advice. This is for educational and entertainment purposes only. I am not responsible for the profits or loss generated from your investments. Trade and invest at your own risk.


Basic Elliott Wave Structure
- 80% of the time, an Elliott Impulse Wave would have a structure as the diagram demonstrated above.
- After the first impulse wave, we have wave 2, which is a short term corrective wave, play out.
- Most of the time, the second wave demonstrates a zig zag pattern, in which we can count ABC waves.
- When the second wave is a zigzag, there's a high probability that the fourth wave demonstrates a complex correction, such as a double three (WXY), or a triple three (WXYXZ).
- Also, when the second wave is a zig zag pattern, there's a high probability that the length of the third wave is 1.618x of the first wave's length.
- In this case, there's also a high probability that the length of the fifth wave is equal to that of the first wave.
- Keep in mind that these are all probabilities. There are no rules set in stone that state that waves have to move a certain way, in a certain length, but they tend to demonstrate this structure under certain conditions


Bitcoin's Elliott Wave Structure
- However, as you can notice from Bitcoin's Elliott Wave count chart above, Bitcoin's second wave did not demonstrate a zig zag pattern.
- Instead, Bitcoin demonstrated a triple three (WXYXZ) leading to a sharp final drop caused by the Covid outbreak.
- When the second wave demonstrates a triple three pattern, there's a high probability that the fourth wave demonstrates a zig zag pattern.
- Also, when the second wave is a complex correction, there's a high probability that the third wave's length is 2.618x of the first wave's length.
- Additionally, when the second wave is a complex correction, there's a high probability that the final wave's length is 1.618x of the first wave's length.

Bitcoin Weekly Chart Elliott Wave Analysis
- Taking into consideration the Elliott Wave structures explained above, we can now see that Bitcoin's trend can be explained by the second diagram.
- We saw a complex correction (triple three, WXYXZ) pattern on Bitcoin's second wave.
- We're currently completing wave 4, which seems to be a running flat pattern (ABC).
- While this isn't exactly a zig zag pattern, it's a variation of the zig zag pattern, and part of the larger concept of simple corrections.
- For a more in-depth explanation on this corrective trend for the short term, make sure to check out my previous analysis by clicking the chart below:

Revealing My Secret Method: Technical Symmetry Analysis

Summary
I believe that there's an extremely high probability that Bitcoin's bull run isn't over. While December's price action may be rather disappointing, as we're in the process of completing the final corrective wave within a bigger impulse trend, we could expect a parabolic rally as we move towards Q1 of 2022. Using Elliott Waves isn't about accurately predicting the exact price and period of an asset's price action. While a lot of people try to correct each other on "wrong counts", unless the general rules are kept, there really isn't a strictly correct way or incorrect way of using this theory as a tool. In my opinion, Elliott Waves are best used on longer time frames, to identify the overall trend, and which point of the market cycle we are at.