Bitcoin Low-Time-Frame Analysis

In the aftermath of the unexpected 11% drop that occurred earlier this week, we’ve adjusted our wave count to better align with the current market conditions. This drop has introduced significant volatility, leading to a reevaluation of both bullish and bearish scenarios as we analyze Bitcoin’s next potential moves.

Bullish Scenario: Wave 2 Correction

In the bullish scenario, Bitcoin is currently within Wave 2 after completing a 5-wave impulsive move to the upside. This interpretation suggests that the recent decline is part of a corrective phase within a larger upward trend. However, the price action during this phase has been messy and unclear, making it difficult to identify clean wave structures. This uncertainty is typical in complex corrections, where overlapping waves can obscure the overall trend.

• Current Status: Within this scenario, Bitcoin appears to be forming a B-Wave within the Wave 2 correction. B-Waves are typically characterized by choppy, counter-trend moves that can often mislead traders into believing a new trend has begun. However, if this is indeed a B-Wave, we should anticipate further downside before the market completes its corrective structure and resumes the next impulsive wave to the upside.
• Next Steps: If the bullish scenario holds, the completion of Wave 2 would set the stage for Wave 3, which is usually the most powerful and extended wave in an Elliott Wave sequence. This could potentially lead Bitcoin to break above recent highs, signaling a continuation of the broader bullish trend. However, traders should remain cautious, as the messy price action indicates that the correction may not yet be complete.

Bearish Scenario: Impending Downside

The bearish scenario presents a more ominous outlook. Here, the market structure suggests that the recent price action could be the start of a deeper corrective phase. Specifically, we’ve observed a 3-wave movement to the upside, followed by a 5-wave decline. In Elliott Wave theory, this type of structure often signals the start of a more significant downward move.

• Current Status: If this bearish count is accurate, Bitcoin could be in the midst of a larger Wave C of an ABC correction, or possibly even the beginning of a new downward impulsive wave. The 5-wave decline that we’ve seen suggests that the selling pressure is far from over. The critical support levels in this scenario are the Fibonacci retracement levels highlighted on the chart, which have historically provided strong buying opportunities. However, should these levels fail to hold, Bitcoin could see a significant drop.
• Price Target: The bearish scenario projects that Bitcoin could potentially drop to the $44K level. This target is derived from the depth of the previous wave and the projected continuation of the current decline. A move to $44K would represent a substantial correction and could lead to a more extended bearish phase in the market.

Technical Indicators and Market Sentiment:

Both scenarios are supported by various technical indicators and market sentiment readings. The RSI and MACD on the 4-hour chart indicate that Bitcoin is currently oversold, suggesting that a short-term bounce could occur. However, oversold conditions can persist in a strong downtrend, so these signals should be interpreted with caution.

• Support and Resistance: The key support levels around $58,930, $57,038, and $55,146 are critical in both scenarios. In the bullish scenario, these levels could provide the necessary support for a reversal. In the bearish scenario, a break below these levels could accelerate the decline towards $44K.
• Volume and Market Dynamics: The recent price action has been accompanied by declining volume, which often indicates a lack of conviction among buyers. In the bullish scenario, a resurgence in volume would be necessary to confirm the start of Wave 3. Conversely, in the bearish scenario, increasing volume on downward moves would confirm the continuation of the decline.

Conclusion:

Bitcoin is at a pivotal point, with both bullish and bearish scenarios presenting plausible outcomes. In the bullish scenario, the current price action is part of a Wave 2 correction, with the potential for a strong upward move once this correction concludes. In the bearish scenario, Bitcoin could be in the early stages of a significant decline, potentially targeting the $44K level.

Traders should closely monitor the key support levels and be prepared for increased volatility. The next few trading sessions will be critical in determining which scenario will play out, with significant implications for Bitcoin’s short- to medium-term direction.