Using Elliott Waves to plot potential scenarios for Bitcoin

Bitcoin (BTC) has been on the rise since Jan. 24 and is showing strong signs that it has completed a long-term correction that began in April 2021.

Long-term outlook

Bitcoin most likely started a five-wave (white) bullish impulse in December 2018. If true, the April 14, 2021 high of $64,895 marked the peak of the third wave. In that case, Bitcoin has since likely corrected within the fourth wave, as Bitcoin Magazine noted in its previous analysis of the wave number.

The most likely wave number indicates that wave four ended on January 24, 2022 with a local low of $32,950. Partial wave numbers are shown in red. In it, the waves A and C have a ratio of 1:1, which is quite common in such correction structures.

Therefore, it is possible that Bitcoin has now started the fifth and final wave of its bullish momentum.

The first potential target for the top of this upside move is between $71,600 and $73,600. This target range is found using the length of 0.618 on waves 1-3 (white) and the external Fib retracement level of 1.27 on wave four (black). Additionally, the next targets will be $84.450 (External Fib 1.61) and $95.325 (full length waves 1-3).

BTC/USDT 3-day chart | Source: TradingView

Done tuned

For short-term volatility, the highest probability suggests that wave 4 was a running flat correction and is now complete. The number of partial waves is shown in black, with wave C being completed by a retrograde pulse.

In this case, Bitcoin has now started a fresh upward momentum as part of the wave of five outlined above. This wave has the potential to take BTC to new all-time highs and beyond.

BTC/USDT daily chart | Source: TradingView

Adjustment inside the triangle

The second possibility suggests that BTC is still in wave 4, which will take the shape of a symmetrical triangle.

In this case, Bitcoin can rally towards the 0.618 Fib retracement resistance at $55,250 before falling again and completing the E (red) sub-wave.

The developments since January 24 will be the same in both cases. At the moment we cannot determine which scenario BTC is moving into.

BTC/USDT daily chart | Source: TradingView

Crossover ends

The third and least likely scenario shows BTC completing wave C in a closing crossover that takes the form of a descending wedge.

If true, BTC can rally to $44,600 before falling again and completing this final crossover somewhere near $31,000.

This will also cause the price to drop below the parallel ascending channel that BTC is currently trading in.

BTC/USDT daily chart | Source: TradingView

Furthermore, in a closing crossover, each wave must be an ABC structure. Due to the very short length of partial wave B (red), neither wave one nor wave three formed the ABC structure.

Short-term price action will help determine if this is the right wave number.

BTC/USDT daily chart | Source: TradingView

Short term price movement

Since January 24, BTC has been trading in an ascending parallel channel. It is currently trading slightly above the resistance line of this channel.

If the whole move is a correction, then the ratio of wave A:C is already over 1:1.

Therefore, if the proposed end-crossover scenario occurs, BTC must reject and fall from current levels.

Hourly BTC/USDT chart | Source: TradingView

On the contrary, the most likely scenario is that the uptrend is part of the bullish impulse. This is supported by increasing volumes.

If Bitcoin breaks out of the channel on high volume and then confirms it as support (green circle), it will almost certainly confirm that a new uptrend has started.

This supports the possibility that the customization is complete. However, this will not invalidate the triangle scenario as the entire move could still be part of Wave D that would eventually take BTC to $55,300 to complete the triangle structure.

Hourly BTC/USDT chart | Source: TradingView

Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

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