• Elliott Wave Principle is a technical analysis tool that seeks to identify repetitive patterns in financial markets.
• It divides price movements into waves, each representing a specific phase of market behavior and providing clues about potential future price movements.
• In the context of Bitcoin, the current wave count suggests that it is in Wave 5, characterized by positive news cycles, improved performance and fundamentals and psychological factors such as FOMO.
Understanding Elliott Wave Principle in Bitcoin
The Elliott Wave Principle is a technical analysis tool that seeks to identify repetitive patterns in financial markets. It divides price movements into waves, each representing a specific phase of market behavior and providing clues about potential future price movements. In the context of Bitcoin, this principle can provide valuable insight on where the top cryptocurrency stands in its market cycle.
Wave 1
Wave 1 marks the initial rebound from undervalued levels, indicating the recognition of Bitcoin’s potential.
Wave 2
Wave 2 represents a retest of previous lows without establishing a new low, implying continued negative sentiment. The absence of a new low in wave 2 often prompts increased participation in wave 3.
Wave 3
Wave 3 tends to be longest and strongest wave due to positive news cycles and growing fundamentals which support the upward momentum.
Waves 4 & 5
Wave 4 signals the end of the growth phase, characterized by profit-taking activities as valuations fail to meet investors’ expectations despite enthusiasm witnessed during wave 3. This is followed by wave 5 which represents final advance driven by improved performance and fundamentals as well as psychological factors such as fear of missing out (FOMO).