Not Your Ordinary Bitcoin Pullback
EWM Interactive | Nov 11, 2017 11:54PM ET
The price of Bitcoin reached a new all-time high of $7888 two days ago, making the biggest Elliott Wave Principle , which is a technical analysis method suitable for markets, where collective psychology is the main engine. Since the crypto market is far from regulated, it is people’s optimism or pessimism that drive the price of virtual currencies, including Bitcoin.
It shows that the current slump did not come out of the blue.(some marks have been removed for this article)
To be honest, this chart depicts our alternative short-term scenario for Bitcoin’s price(the primary one was bearish right away). As visible, while the pair was trading near $7560 on Sunday, the Wave principle suggested it was not an appropriate time to join the bulls, because at least a temporary pullback in wave 4 was expected. On the other hand, even if a new all-time high was reached in wave 5 of (5), it still would not be a buy signal, because the five-wave impulse was supposed to be followed by a bearish reversal. And if the chart was not enough, the relative strength index gave us another reason to stay aside by showing a strong bearish divergence. Five days later, this is how the hourly price chart of Bitcoin looks today.
Wave 4 formed a bottom at $6922. Then wave 5 of (5) skyrocketed to $7888. Judging from the speed and sharpness of the rally in wave 5, there must have been a lot of buy orders waiting for a bullish breakout. Alas, the uptrend quickly ran out of steam and reversed to the south for a plunge of nearly $1400 so far. The good news is that none of this was a huge surprise to experience Elliott Wave analysts, who were able to recognize the warning signs before it was too late.
Now, it is also true that the majority of crypto traders are so in love with Bitcoin that they see every dip only as a buying opportunity, completely ignoring the possibility that the price might not recover. This is a dangerous state of mind, especially since Bitcoin’s uptrend has all the traits of a bubble. Of course, this could be just another dip to buy, but we would not bet the house on it…
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