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Bitcoin: Bear sentiment confirmed, Elliott wave incorrect (BTC-USD)

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In my recent Bitcoin (BTC-USD) article, I gave Bitcoin a bullish rating as the currency chart is still showing Elliott wave and was trading in an ascending channel. With the uncertainty in the markets Amid inflation and Fed rate hikes, the broader markets have been penalized. However, bitcoin price collapsed, breaking critical support levels that must be maintained to validate the Elliott wave and bullish sentiment on the cryptocurrency.

The Elliott wave has been nullified

There was some controversy in my comments to my last article about whether or not an Elliott wave was in shape. I would say that Elliott waves are not always perfect in terms of guidelines and observations. The first issue I addressed in my comments was related to the fact that the third wave cannot be the shortest wave. That’s right, the third wave was shorter than the first. However, the fifth wave can be the longest wave, and when trying to predict a movement based on the wave structure, you can’t invalidate the theory because it hasn’t happened yet. Obviously, it’s easy to spot Elliott waves once they’ve actually happened. In the case of Bitcoin, a fifth, larger wave than a third would have validated the Elliott wave. Another concern relates to the guiding principle that a fourth wave pullback cannot enter the first wave area. This is true in the simplest Elliott waves. However, when observing diagonals, especially major diagonals, the fourth wave can actually enter the area of ​​the first wave without invalidating the Elliott wave. Bitcoin candle chart showed a major diagonal low. It’s hard to tell because the trend lines are almost perfectly parallel.

Now that I addressed concerns in my previous article, I’ll point to a basic Elliott wave directive that cannot be justified by nuances or observations. That is, the fifth wave cannot break below the bottom formed in the fourth wave. With the devastation in the markets today, that’s exactly what happened, nullifying the possibility of an Elliott wave appearing in the Bitcoin candle chart.

Bitcoin technical analysis

Invalid Elliott Wave (by author) (tradingview.com)

The above chart shows that the critical support level around $33,000 has been clearly breached. This nullifies the possibility of the emergence of the Elliott wave. I have also drawn trendlines from the first and third waves as well as the second and fourth waves to show the major diagonal that kept the possibility of an Elliott wave valid as the fourth wave enters the price territory of the first wave. Either way, it doesn’t matter now that the bottom formed in the fourth wave is officially broken. When looking at inflation, the Fed’s rate hike, the performance of the Dow and the S&P, this comes as a particularly bearish price movement for Bitcoin.

Additional Bitcoin Support Levels to Monitor Moving Forward

Below is a chart of the different levels of support to monitor the progress forward. Inevitably, I think a break of the $33,000 support is hugely bearish, especially when looking at the broader market conditions.

Bitcoin technical analysis

Additional Bitcoin Support Levels (by author) (tradingview.com)

I can’t say how far Bitcoin will fall, however, the following support levels are not entirely favorable to the long-term. Bitcoin has managed to avoid breaking the $29,000 support level at the moment. And in case it breaks $29,000, the next support levels are $26.4K, $23.6K, and $19.3K. I wouldn’t say Bitcoin is completely broken; It could swing above $33,000 and continue to consolidate. However, things are looking good so far. On the current trajectory, Bitcoin appears to be heading towards a $23,000-$26K price channel.

Some positive aspects to consider

All my work on cryptocurrency has been positive, as I believe there is potential for a use case in many crypto projects. However, I think there are some positive aspects to consider after the bloodbath on the market today. First, cryptocurrency markets are very volatile by nature. For those seasoned in the cryptocurrency market, know that big price movements can happen on a whim. Whether it’s broader market problems, divestitures, news from China, or just about nothing, what happened today is not far from the norm. This crypto market has been witnessed before and has prevailed. The second is that Bitcoin has been consolidating its price above $30,000 for some time. Prices have not crossed the ceiling but remain stable. Given the observed economic conditions, the Bitcoin price movement is not unjustified. My point is that the Bitcoin price movement is not behaving in a illogical way compared to the broader market. I find this to be a positive feature of the observed decline in the price of Bitcoin. The third is the fear and greed indicator on Bitcoin. Bitcoin’s rating falls into the “extremely fearful” range with a score of 10. The scale ranges from 1-100, with 1 being the scariest and 100 being the most greedy. The Greed and Fear Index is quite accurate in determining that a security has been oversold in “extreme fear” ranges. Given that Bitcoin is already in the “extreme fear” range with only 9 pips before the floor, the bleeding will likely taper off sooner rather than later. In addition, the stochastic RSI for Bitcoin is below 8, which also indicates significantly oversold.

My Recommendation for Bitcoin Investors

My recommendation for Bitcoin investors will vary depending on the average cost. For true long-term enthusiasts, especially those with a high average cost, owning is likely to be the best option. For those with an average base cost of less than $23,000, it may be wise to take profits now, as it is very likely that you will have the opportunity to re-enter at similar or lower levels if the market turmoil continues. I am currently cutting my Bitcoin “Buy Rating” to Hold/Sell. While I am not completely bearish about Bitcoin, it is wise to take advantage of the price fluctuations in the crypto market. I think the cryptocurrency will rebound as the broader market stabilizes, however, the short-term outlook is quite bearish. For those who are making profits, I would recommend taking profit, and for those with big unrealized losses, long term holding is likely to be the best game.

Conclusion

To conclude, the Elliott wave on the Bitcoin candle chart was invalidated with a breakout below the $33,000 support level (the lowest level created by wave 4). This is a strong bearish indicator, especially when considering the poor state of the current market (inflation, rising interest rates, bearish indicators). The support levels identified in the above chart should be closely monitored to gauge price action and potential trading points for day traders. I still recommend holding for those in the red, especially if the unrealized losses are significant. I think the crypto market will rebound in time as it was in the past. For those who might be profitable, it is wise to take profits and look to re-enter at similar/lower prices. However, today’s Bitcoin price action confirmed strong bearish sentiment.

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