QCP Capital says Bitcoin remains in bearish Elliott Wave pattern despite 47% rally
Resurrection for Bitcoin
The resurgence of Bitcoin (BTC) this year has convinced many analysts that the crypto bear market is over and the path of least resistance is towards the higher side. However, QCP Capital recommends otherwise. According to the Singapore-based crypto options trading giant, Bitcoin’s 47% year-to-date rally looks like a ‘bear breath’ in a broader decline that began in November 2021, and the last leg of the bear market could resume soon.
The analysis is based on the Elliot Wave theory introduced by Ralph Nelson Elliott in his 1938 book ‘The Wave Principle’. The theory assumes that asset price movements can be predicted by observing and identifying a repetitive wave pattern.
Elliott found that market trends occur in five waves; of these, waves 1, 3 and 5 are ‘driving waves’, representing the primary trend. Waves 2 and 3 are ‘backtracking waves’ that give a temporary ‘breath’ to previous impulse waves. An important rule of thumb is that the first wave tends to be roughly the same size as the fifth wave, and the third wave is usually the longest.
Possibility of new wave
In QCP’s analysis, Bitcoin’s slide from a record high of $69,000 in November 2021 to $39,000 in January 2022 represents wave 1, and then jumping to $48,000 by March 2022 represents wave 2. . The drop from $48,000 to the November 2022 low of $15,480 represents wave 3 and the recent bounce forms Wave 4, a bearish breath similar to wave 2.
Next is wave 5, which, according to QCP’s analysis, could push the cryptocurrency as low as $15,480, which is the lowest level of wave 3, if not deeper. “A potential double top is forming against the August 2022 correction peak and the May 2022 response is low at 25,300,” QCP Capital’s market insights team said in an update Wednesday. said. Then, ‘Above this, we have a huge resistance of 28,800-30,000. Until these levels are broken, our 5 wave count is still valid and a final 5th wave will drop.’ it was added.
QCP’s analysis comes a week after former Goldman Sachs analyst William Noble told CoinDesk that the cryptocurrency is poised for a rally to $56,000. Describing waves is an art. Each wave can be divided into sub-waves as seen below, making the analysis quite challenging compared to the traditional Dow Theory.
QCP’s chart shows a bearish five-wave structure and the fifth and final wave lower has yet to emerge. Defined by year-to-date gain, wave 4 stalled around $25,000, a resistance level stretching back to August 2022 high. A turn lower now confirms a potential pair as QCP points out and could mark the start of wave 5 selling. The five-wave bearish structure will be invalidated if the ongoing wave 4 breaks above the $28,800-30,000 resistance range. According to cryptokoin.com data, Bitcoin is traded at $ 23,907.
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