Bitcoin has been in a tumultuous consolidation phase ever since reaching its all-time high of $73,794 on March 14th, 2024. The price action has been volatile. Fluctuating between $72,000 and $50,000 for more than six months. Even experiencing a flash crash in August along with the rest of the financial market. Sending bearish signals across the globe. This has made it challenging to confidently label these recent market wave fluctuations.
I am bullish on Bitcoin since the first quarter of 2023 and nothing has changed after these market waves. And I am going to explain why I still think this market is going to go up, way up.
The Fall of the Dollar
The first chart to highlight is the correlation between the dollar and Bitcoin (and other assets in general). This is the Dollar index chart starting from 2020 till 2024, paired against the Bitcoin chart. The base thesis is that the Bitcoin price is inversely correlated to the money supply, with the dollar index (and fiat currencies in general) as a derivative expression of that supply.
There are three distinct phases in the Dollar index chart. The first phase (2020 – 2021) was during the pandemic where capital fled into safety of the US Treasury bondmarket causing negative rates which was then followed by massive borrowing and spending at cheap rates which gave rise to worldwide inflation including asset prices as Bitcoin (gold, real estate etc) while the dollar index went down significantly.
The next phase is when bond market rates started reversing. Long duration rates went up in the fastest rise ever recorded, which prompted the central banks to start tightening in late 2021/ early 2022. This nicely correlates with Bitcoin’s bear market decline into the entire year of 2022.
Markets could not endure such high rates for long with the enormous amounts of debt that had been accumulated worldwide. Bond prices crashed (inverse correlated to interest rates) and small to mid sized banks in the US and even mega banks in Europe (Credit Suisse) started to collapse before the Fed stepped in. This was the start of the ensuing trend reversal in late 2022/ early 2023 for equity markets. And coincided with the bottom for risk assets like Bitcoin in November of 2022.
The Dollar Index made an intermediate bottom in the summer of 2023 and retraced the previous decline while Bitcoin started moving sideways for months. When the Dollar Index made an lower high late September 2023, Bitcoin started bottoming and initiated the bull run well into the March 2024 high.
Dollar breaks out the wedge in July 2024
The dollar has been trading within a bearish wedge since that summer of 2023 but recently broke downwards in the first week of July 2024. And it has continued to go lower ever since making an recent low around the 101 level. This signals a long term trend continuation which started on 28th of September 2022. And it is a strong positive signal for what is to come in 2025 for assets like Gold and Bitcoin.
The Expected Fed Rate Cut Cycle
The market seems to expect the Fed to have cut the rate to around the 3% level by July 30th 2025. Which means that capital that is looking for yield will start to look for it into other assets, most likely high volatile assets.
This assumes that the slowly rising curve of unemployment rate in the global economies does not accelerate but instead flattens within reasonable ranges.
Bitcoin’s Long Journey Through the Waves (2012-2024)
So how does Bitcoin line up with the dollar index? Before doing so I want to take a step back and zoom out to have a higher timeframe perspective of the price of Bitcoin. I have used this longterm Bitcoin chart, viewed on a quarterly candlestick basis, starting all the way back from 2012 untill 2024. And I have added the Elliot Wave labels on each significant high and low on the Bitcoin chart.
The Hierarchical Time Structure of Price
What these labels do is, they categorise each price move of Bitcoin and place order them in a hierarchical time structure according to the rules of the Elliot Wave principle. For anyone unfamiliar with the Elliot Wave Principle, the illustration below shows a simplified version of the Wave Principle;
The Elliot Wave principle (simple fractal) states that markets can be categorised into two states; either prices move as impulse waves or corrective waves. Impulse waves move in five phases (1,2,3,4,5) while corrective waves generally display three corrective phases (ABC). The rules for impulse waves when labelling tops and bottoms of any impulse trend are;
- – Wave 2 cannot go below the start of wave 1
- – Wave 4 cannot go lower than the top of wave 1
The next import thing to understand is the fractal nature of each impulse wave. That means that each impulse wave in general consist of five smaller impulse waves that each resemble the larger wave as shown in the illustration above (complex fractal). This recurring phenomenon repeats at many timeframes from centuries down to hours and even seconds.
The easiest way to understand this concept is; imagine looking at the chart using a special glasses able to zoom into any part of a price chart. If you start from the highest point in time overlooking centuries seeing a giant five impulse wave (simple fractal) as shown in image 1. Then start zooming in on one single trend, let’s say wave 1. As you draw closer you would start to see a five wave impulse appear again looking similar to the original at the beginning. This effect would repeat itself if you would decide to zoom in further down the line into the smaller wave 1. It is a simplified explanation of the Wave Principle. In reality, there is a lot more nuances to learn to grasp the Wave Principle, but this explanation is sufficient for explaining the reasoning behind how I chart the Bitcoin chart.
So going back to our original Bitcoin chart, we can see similar wave characteristics. On the Bitcoin chart are two distinct timeframes of which one is the larger degree called the Cycle degree and the smaller degree is called the Primary degree (in red).
The fractal relation between the Cycle degree and the Primary degree is that the Cycle degree can be broken down into smaller timeframes of the Primary degrees (red labels) which can last several months to years.
The Cycle degree, which is labeled in green(I,II,III,IV,V) generaly has a timespan between a year to several years while the Primary degrees (red labels) covers time spans from several months to years.
Why this is the Preferred Count
So how do I count the peaks and dips of the Bitcoin price between the period of 2012 till 2024?
The bull market started from the November 2012 low at $2,20, and went up until the 2017 high of $19,666 labeled as the peak of Cycle wave III (green label). After that all high time, Bitcoin started a bear market that formed an expanded Flat correction as an Cycle wave IV, which bottomed out at $15,479 on November 21, 2022.
This appears to be the most convincing count because it adheres to the Elliot Wave rules outlined above and also conforms to the guidelines of alternation which states that wave 2 often displays deep (zig zag) corrections while wave 4 alternates in character and often moves in sideways motion like ‘Flats’ or ‘Contracting triangles’.
Which is the case according to this count, where during the years (2017 – 2019) Primary (2) has a usual deep zigzag retracement while the Primary (4) wave had a sideways correction which satisfies the alternation guideline.
What adds weight to this count is the swift breakout that followed, which lasted only six months before hitting a new all-time high of $64,895 in April 2021, marking the completion of Primary (5) & Cycle wave (III). These swift breakouts often occur after a contracting triangle in the Elliott Wave model across different time frames.
Bitcoin’s new Bull Market since November 2022
The swift breakout and subsequent bull market of 2021 was followed by a wave 4 correction Cycle degree (green), which can be counted as a ‘Running Flat wave’.
Bitcoin has been in a major uptrend since November 2022 when this wave 4 bottomed in November of 2022 at the hight of bearish sentiment that accompanied the FTX collapse. It started a new impulse Primary (red label) wave 11 which can be subdivided into five Intermediate waves (black label).
Bitcoin completed Intermediate Wave (1) (black label)on April 10, 2023, at $31,305, followed by a ‘Flat correction’ that formed Intermediate Wave (2) on September 11, 2023, at a low of $24,920.
Intermediate Wave (3) subsequently started a powerful impulse, pushing Bitcoin to hitting an all time high of $73,794 on March the 14th 2024, surpassing the 2021 peak before retracing back into a Wave 4 correction phase that we currently finds ourselves in as of writing.
It has been Choppy for more than six months – Little Bear
This current corrective phase has been challenging to label.
On the positive side, there has been much price overlap for over six months and gives confidence that this phase can be identified as an Intermediate wave 4 with reasonable high probality based on the Elliot wave principle.
Prices have not corrected below the highs of Intermediate wave 1, which were set at $31,305 on April the 10th 2023. If it did, it would have invalidated this count.
So the Bitcoin price has also stayed nicely contained within a parallel channel which are highly indicative of an corrective wave instead of an impulse wave to the downside.
Identifying the final low for Intermediate Wave 4 has been tricky though, as Bitcoin has continued making new lows within the range 70K – 55K for more than six months. My current estimate is that were are in a (WXYXZ) zigzag combination. With the final c wave of Z the be formed within coming weeks.
I would like to look at some indicators outside of the Wave principle to see if we can get some confirmation
RSI Bulllish Divergence
We are starting to see divergence emerging in the Relative Strength Index (RSI) on the closing daily chart which is looking very promising. Confirming the scenario that we are close to the end of this Intermediate (4) wave correction.
Fear & Greed Index
The market sentiment is quite gloomy at this moment in time of writing. Looking at the Fear and Greed Index which stands at 26 which is at levels not seen since September of last year just weeks before the bull trend started moving upwards again. Which should add to the body of evidence that a new bull market is about to start again.
BTC Short Term Outlook – Fibonacci Time Zone
Let’s apply the Fibonacci Time Zone Tool to the previous bottoming period last year around September 2023 to see what we might expect for the short term
If we take the bottom of the market on November 2022 (0) as the starting point and the top of April 2023 (1) as the first interval, we see an significant rotation point right after the 2nd interval.
The tool signalled the start of the previous upward trend last year with tool. It might be useful in this current period as well.
If we translate the Fibonacci Time Zone Tool to this current period we get an rotation dat around 15th of September 2024 which is in the week of the FOMC meeting where the Fed is expected to start a new rate cut cycle.
This adds to the expectation that we are nearing the final stages of this correction.
Bitcoin vs USD Tether
If we compare Bitcoin to USDT we also see interesting inverse correlations that signals rising prices for Bitcoin going into next year. On the top we see USDT and below is the price of Bitcoin. What this chart tells us first of all is that whenever Bitcoin gets sold, it gets sold for USD tether. So when demand for BTC goes down, demand for USDT goes up and vice versa.
What is interesting from a technical perspective is that the previous rise that started mid September of 2023 was preceded by an bearish flag formation where prices had stayed in a parallel channel for months before breaking down.
Similarly, this time USDT is again forming a bearish flag contained within a parallel channel which signals a bearish signal for USDT and simultaneously a bullish signal for Bitcoin.
Bitcoins Halving Cycle
The Bitcoin cycle is often referred to in the world of crypto analysis. And it is a remarkable cycle that is worth mentioning because of how accurate it has been in predicting lows and highs. It has not been proven why or how it works or even if it will work in this cycle for the obvious reason that Bitcoin has not been around for centuries to firmly test this cycle. And even if it would continue to work if the majority of the investors would know about it. All we know is that the last three cycles have shown that roughly 14 to 18 months prior to the halving date Bitcoins sets a bear market low and roughly 17/18 months after the halving the price of Bitcoin sets an bull market high.
What the pattern suggests for this cycle is that we should top out anywhere between April and November of 2025
Breaking Previous all time high
In the last two cycles BTC broke the previous all time high after 8/7 months. That would set our current breakout of the all time high somewhere between mid November/December 2024.
Important Fibonacci Support & Resistences
Looking forward, what are important resistence and support zones to be mindful of. An useful tool to find resistence and support zones is using the trend-based fibonacci extension. Using the larger timeframe, starting from the date of the 2015 low and connecting it with the high of 2017 high and then finally connecting it with the second higher low in 2018, we get the subsequent important levels of resistence and support.
We see Bitcoin being rejected and finding support at multiple times on the 1,618, 2,618 and 3,618 levels. Notably, the price of Bitcoin is currently as of writing near the support of the 2,618 fibonacci level, which has functioned as a resistance level during the topping process of the market high of 2017. Considering the technical support/resistance guidelines, where prior resistance levels become support eventually when broken through, would mean that this increases the probability that Bitcoin is able to find support around the $54,482 level this time around.
Cup & Handle: extreme Bullish Price Projection 2025
Since the March 2024 correction Bitcoin is potentially forming what is known as a cup and handle pattern.
This pattern could potentially be extremely bullish if it roughly were to play out as described in TA textbooks. It ticks off all the boxes except one, which is that it fails to full fill the condition of not being allowed to correct more than 1/3 of the prior move. Which it did, it corrected about 1/2 of the prior move. That makes it less likely to actually be reliable as an indictor for future moves. In case Bitcoin still manages to aggressively break all records swiftly passing by the $150K early 2025, we might want to revisit this expectation, because this pattern predicts a minimum target of $340K.
Concluding
Be prepared. The money printer will go Brrrrr. The system has cornered us in such a way that debt can not be serviced in any other way. Either assets crash to zero (theoretically) or hyperinflation destroying the currency while hyperinflating (asset) prices. The system has become fundamentally unstable. And for small investors the options remaining seems the ride the waves of instability. So make sure you know how to navigate them. Bitcoin and some crypto in general are more sensitive to these monetary expansions. They crash up and down more violently. Be prepared for a crash upwards up until end of 2025.
But when the time comes, be prepared to sell your crypto.
When this market starts to play out the bull scenario in 2025, Fomo (fear of missing out) will become a real thing again as it always does. It is a type of psychological energy that is unavoidable. Part of the human collective mind.
Even if you are prepared, you will start to second guess yourself into thinking that this time might be different. It is an phenomenon that makes market tops possible.
Do not be one of those people FOMO buying the top when you sell a bit early. Be prepared and recognise when you do start to sense feeling of exuberance in yourself, in your surrounding or on social media.
Ignore any news that start to hype up the market. Ordinary people that have not been interested in the markets suddenly become captivated by the crypto market. Telling you their genius investment advices. The market is driven by market psychology and it gives signals. Interpret them as contrarian signs.
I have seen it many times already. And it is always the same.
