Wave theory suggests that market trends unfold in five waves, three of which represent the primary trend and the other constitute partial retracements. Bitcoin’s year-to-date rally seems to be a retracement ahead of the final leg lower, the crypto trading firm said.
Bitcoin’s (BTC) resurgence this year has some analysts convinced that the crypto bear market has ended and the path of least resistance is to the higher side. QCP Capital suggests otherwise.
According to the Singapore-based crypto options trading giant, bitcoin’s 47% year-to-date rally looks like a “bear breather” within a broader slide that began November 2021, and the final leg of the bear market could soon resume. The analysis is based on Elliot Wave theory introduced by Ralph Nelson Elliott in 1938.
Elliott found that market trends unfold in five waves, of which Waves 1, 3, and 5 are “impulse waves” representing the primary trend. Waves 2 and 4 are “retrace waves,” representing a temporary “breather” to the preceding impulse waves.
An important rule is that the first wave tends to be roughly the same size as the fifth, and the third wave is usually the longest. In QCP’s analysis, bitcoin’s slide from November 2021’s record high of $69,000 to the January 2022 low of $39,000 represents the beginning of Wave 1 of a new bear market.
The crash from $48,000 to the November 2022 low of $15,480 represents Wave 3, and the recent bounce constitutes Wave 4 – a bear breather similar to Wave 2. Next up is Wave 5 which, in QCP’s analysis, could push the cryptocurrency down to the Wave 3 low of $15,480, if not deeper.
“A potential double top is forming against the August 2022 correction high, and May 2022 reaction is low at 25,300,” QCP Capital’s market insights team said in an update published Wednesday. “Above that, we have the huge resistance at $48,000 that is the key to the next bull market.”
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