Bitcoin Preparing for Deep Retracement to Sub-600 (Elliott Wave)

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar

The smallest degree shown here appears to be finishing a fairly clear double zigzag . On the 60m chart you can see a confirmed terminal wave 5 of c which likely puts us at the end of the larger pattern as well, though, the small possibility of this forming into a triple zigzag can't be fully ruled out, it is also very unlikely. With that in mind this double zigzag is very likely completed and will be confirmed shortly at which point it may be a good idea to get very aggressive with this trade until it reaches about a 70-80% retracement of wave (b), which is the common retracement for a double zigzag . Wave (c) will also likely relate to wave (a) by 1.0 in time so this could potentially end right after quarterly settlement at the end of the year, which would mean this is potentially the top for the next couple of months, until we get a new bull run which should be much stronger than wave (b) and retrace wave (c) faster than it was formed to be fully confirmed.

There are also really big daily bearish divergences that look ready to pop and a perfect double top on BTCUSD . This leaves us with a very good r/r trade that is fairly likely to be confirmed and will be confirmed if it breaks the b-b trendline and retraces all of wave c faster than it was formed. As customary with unconfirmed counts it is better to wait for more confirmations on this larger count before getting too aggressive, but on the shorter 60m count there is definitely a confirmed terminal impulse wave 5 that you could certainly get pretty aggressive on if this initial down move isn't retraced too deeply, and from there it may continue on to confirm the larger count as well, which is very likely to happen because usually the whole impulse will be retraced when there is a terminal wave 5.

This sets us up with a really good risk/reward trade on the 60m chart which is confirmed and if this does end up violating the top and trigger the stops it will likely be profitable to stop and reverse so you can make back all your losses because it will likely continue on to form into a triple zigzag which could take us significantly higher.

Always remember to want what the market wants. Inner peace is the most valuable commodity you can attain. Be fearful and logical in your management, greedy in your analysis, and confident in your trading. Having fun is the key to successful trading and being able to reverse a bad trade. Fear will only cripple you during trading hours, fear can find risk/reward and manage but it is a terrible trader because it makes you do the wrong things at the wrong times, you can't be fearful and confident at the same time. Confidence knows what to do and when to do it, and its a great trader, but it's a reckless manager and analyst. Greed puts you in the best mindset for finding the underlying structure of the market as long as you are following your management strategy and don't get suckered into get rich quick schemes. A fully integrated approach of managerial fear, greedy analysis, and then confident trading is the ideal integration of all parts of the human psyche into your trading, and if you can work from a mindset of creativity instead of problem solving, and you can have fun while you trade, then you will be able to use the power of human intuition, inspiration and insight to improve your trading even further.
Trade closed manually: This retracement is too deep, I reversed my position after the 5m correction failed. It will probably keep going after this but hard to say how far or if it will get a wave-c soon so it is probably a good idea not to stay long until its more clear. Wave c might not be over yet (if my terminal count is wrong) or this is probably an x-wave.

This is one reason why you should wait for the higher degree confirmations before getting aggressive on a trade like this, It was a very low probability that this broke up but it did, likely it was my mistake for thinking that this was a terminal and a failure on the 60m and it was probably something else (or it was just wave 5 of 3).

How far up will this go I have no idea, it might even need to pull back and make a wave-c from here before continuing up. It's best to be cautious in both directions now until there is something that is confirmed.

This is my best guess for what I think is going to happen from here. What makes the most sense to me, ie. why I was wrong, is because I counted wave i of c as all of wave c, but now looking back on it that doesn't make much sense for a few reasons, mainly that its far too small in price compared to wave a, usually for a zigzag it will be at least 0.618 of wave a, which at this point its not, also its fairly small in time too compared to wave a.

This means we're much more likely to still be in wave c rather than this being an x-wave. But this is only speculation and from here only time can tell and its best to stay out of a long-term position until there is a clear confirmation. If the above chart plays out it will set us up with the essentially the same trade as the chart I published a couple days ago, as I said earlier I may have just been early with this trade.
Comment: I just want to point out the update I just posted an hour ago could go in a lot of different ways, depending on which wave is extended. Right now I'm GUESSING that it's going to form a first wave extension based on the size of wave 1 but there is really no way of knowing for sure which type of impulse could form because the correction preceding it was a common flat which doesn't really tell us much about the implications of future price action, and this could potentially go much higher if it were to form a 3rd or 5th wave extension, so for now we'll just have to see how it develops. If this ends up being a 3rd or 5th wave extension then we could go as high as 855.

It's interesting to note that if the first wave extension did play out then we'd probably form a nearly perfect double top on the daily chart and possibly even a nice little bull trap by moving just a few ticks above the June high. Also since this is likely to break the top of wave-a it means that it will probably form an irregular failure in the longer term which is more bullish than a c-failure.

For now, we'll just have to see how this develops before taking any long-term positions, but the overall count I have published here seems to still work I just tried to call the top a bit early.

Because this broke the 0-B channel and because this currently appears to be a non-limiting triangle, It is possible that we are in a double three correction and that the larger wave-c has not even begun yet. This would mean that we are likely to go to about 920 on this run if we are in a double three. Now there are also multiple other possibilities which i've laid out previously, like this non-limiting triangle could be an x-wave, and there is a small potential it's not a non-limiting triangle and its actually a flat with a very odd looking terminal (unlikely). I think that either the x-wave or the double three are the most likely possibilities, both of which are very bullish.

There is also the first stage of confirmation on bitstamp. If this continues to trend up and break the high from a couple weeks ago fairly quickly then we are very likely to continue to trend up to 840+

(this chart goes with the comment above)
Comment: It's also possible that this is still only wave-d of a larger triangle and that we could potentially have a much larger wave-e left in this triangle. At this point that is a good possibility so it's something to keep an eye on until we complete stage 2 confirmation of the triangle (which is break the high of the triangle). After that it will be safe to get much more aggressive with this long position.


Triangle is stage 2 confirmation on Bitstamp. Since it is a non-limiting it's still hard to determine if its a double three or an x-wave, but the former is much more likely. If so this chart should continue to play out as expected:

If it is an x-wave instead of a double-three then it is a lot less clear how high this wave could go because it could be followed by any three pattern.

Also watch out for a correction when the post-triangular thrust reaches about the length of the longest leg (wave-a) of the triangle, which is around 760 on stamp.

The Italian referendum failing to pass today could lead to massive capital flights out of the euro and the eu which may, over the next few weeks, help increase bitcoin price. Also this month, India decided to make most of their currency invalid over night (surprise!) to help combat illicit money and overtax the citizens even more. These are both going to lead to capital flights and some of that capital is inevitably going to go into bitcoin simply for the ease of movement and the increasing acceptance, especially in safe haven countries like the US that have strong currency you can convert your btc into usd fairly easily and quickly and even pseudonymously at many different brokers and exchanges around the world.

I expect this chart to continue to play out as expected. We are most likely in wave 2 of (c) right now, and since wave-(b) appears to be a double three we most likely still have an extended wave left in this run up, either wave-3 or wave-5 of (c), because all of wave-(c) should be equal to about 1.618 of wave (a) if this is a double three. We'll have to see how wave-2 finishes developing to predict which wave will be extended and wait until wave-3 is over before we can know for certain if wave-3 is extended or not, or if its possibly going to be a wave-c if the triangle was actually an x-wave.

Since this correction has retraced more than 61.8% of the last leg up, I think that we are likely not in an impulse and that the non-limiting triangle we just completed is actually an x-wave. If that is correct then we will likely continue to develop into a triangle or a flat from here like the above chart shows.

A top here may make sense considering how bearish the momentum is. We'll have to see how this continues to develop before making any definitive calls, but the bull case seems to be quickly faltering.

This may actually be playing out like my first update said, with a polywave c-wave which would look something like this and also be in a terminal.

The other possibility is that this is a triple zigzag. The main difference between these two patterns is that the triple zigzag could go higher (but it doesn't have too) and it will likely only be retraced about 61.8% compared to the double zigzag ending on a c-wave terminal which would be retraced about 80%. At this point this is still just speculation and we'll have to see how this continues to develop before making any big trades. As long as this next run up doesn't run away and become significantly bigger than wave iii/wave a, then this is very likely to be the last leg up.

The huge daily divergence that keeps getting bigger the more this crawls up will likely break down very soon.

Amazingly we've smashed through two dozen sell signals to make it to this price, which in itself is surprisingly bullish, however, even with that said there is still one bearish case left - the triple zigzag. Now of course I'm not saying short immediately, I haven't been saying short for awhile (my short-term arrows have been pointing up if you look at my most recent charts) just to be on the look out for a top coming soon, it's obviously taken much longer than anticipated, BUT the thing is the structure of this rise hasn't changed, and really cannot change.

What I mean is that the first leg up from the bottom of the BFX drop is very clearly and unarguably a zigzag with a limiting triangle b-wave followed by an x-wave. That pattern has been confirmed 100%. So with that said this whole rise MUST be corrective and there MUST be some sort of significant retracement before we can take a real shot at ATH. A significant retracement would be at least a 61.8% retracement of the entire rise starting from August. Once that happens then it will make sense for us to begin an advance to the ATH. On top of the zigzag you also have the fact that this retraced the bigger wave much more slowly than it was formed, if it was an impulsive rise it should have been much faster.

Now there is one more possibility, and that is that what I just said above is completely wrong, or that there is some sort of exception to the rule here, and that this does actually shoot to ATH, however I have to say that is extremely unlikely and I wouldn't put any weight on it happening, unless it actually does happen.

For now, It looks like some more upside is in store, but I am still very wary of these prices. Too many weak hands are entering the market at a time when nearly all of the strong hands are in massive profit. This could end up leading to a massive profit taking/loss covering wave that shakes out enough participants to give us fuel for a much stronger rise than what we've seen for the last 4 months.

If bulls aren't able to seriously capitalize on this opportunity and cut through the rest of the 800s like butter then It will be a good idea to hedge on sell signals from here and watch the how it develops in the short-term until we get a break down from the overall trend.

Be fearful when others are greedy.

I just want to update this chart with a simple trade plan since it can be very confusing for some people to understand what I am saying.

Trend: Bullish
Indicators: Bearish
Trade: Continue Holding Bitcoin
Target: Hedge on early sell signals and/or
Go Short if the X-X Channel breaks down

This plan will be valid as long as the triple zigzag count continues to be valid, after around 880 on Bitstamp there is absolutely no way this count could be correct and from there I will have to allow the new information to organize itself.

A break down of the X-X channel from here would confirm the triple zigzag count and from there we'd likely fall down into the green zone I have drawn in the mid 600's.

Since this appears to be a triple zigzag with an extended zigzag on the end here, the whole triple zigzag is most likely part of a triangle, if it gets confirmed.

For now since this pattern has been so annoying and tricky it definitely favors a triangle forming here. I'm not ready to try to pick this top just yet but I will definitely be on the lookout for a break down. IF this is a triangle then the retracement off the top will probably be very sudden and violent and come out of nowhere (hence the annoying and tricky aspect of triangles).

Great profits have been made already, do not get greedy holding out for something that may never come (ATH, 2k, 5k, 10k, or whatever other crazy prices come to mind when you're focused only on how much money you can make from this trade and not the process of trading). A break down out of the b-b channel (x-x channel on stamp) means that the uptrend is over. Right now we're sitting at the top of the channel so it is possible that this is close to the top, though we haven't gotten a signal to sell yet and more uptrend is still likely.

Stamp breaking over 880-900 and holding those prices would likely mean that this triple zigzag count is wrong, however, I still would have to advise extreme caution at the current prices because of the corrective nature of this advance and the possibility that it is in-fact a triangle.
Comment: Also I forgot to mention that since this channels so perfectly it greatly favors that this entire bull run has been a corrective double or triple zigzag and NOT an impulsive wave. Since it is dangerous to assume an elongated zigzag we'll have to wait until that is confirmed by retracing wave c by more than 61.8%

I just noticed another possibility. The strength of this last leg up made me realize that this must be the wave that is actually following the October wave, meaning that all of November was really just a running triangle. This gives us room for a good amount of upside, but it also changes the count to a double combination.

This means that we could go significantly higher from here but when we do finally top out, unless this forms into a triple pattern, the retracement off of the top could be as deep as 80% of the entire double zigzag.

Looks like this was a direct hit on my bullish target, If this resistance zone holds we could see some major downside from here, either down to 600 usd if this is the end of the double combination (which would be likely because when the post-triangular thrust out of a running triangle is greater than 2.0 of wave b of the triangle it usually signals the end of the higher degree pattern as well). However, that is not necessarily true it's just another guideline and it could be invalid IF this wave we're experiencing right now turns into an x-wave.

From here we'll have to see if this gets confirmed before getting too aggressive on this trade but it is a good idea to be hedged from here with a tight stop loss. IF this did break the high from here it will probably be a good idea to reverse and go long because it could get explosive.

We may be nearing the end of the bubble that I called over a year ago when we were at 400 USD, if my new count is correct.

I mistakenly had said that because this began from the bottom of the BFX low in August as a zigzag and not an impulse, that this whole rise beginning from there must be a corrective wave. It appears that is very likely incorrect due to the new information that has presented itself. What appears happened, and which is verified by the channeling, is that the zigzag that began in August was actually an x-wave (like I had originally predicted it would be a few months ago), and it was followed by a running triangle. This would allow a double combination to be fully retraced and fit in the b-wave position as so. It also creates a perfect 5th wave extension beginning right at the end of the assumed running triangle and at the channel touch point.

IF this count is correct we are extremely close to the end of this bubble and the retracement off the top is likely to be extremely violent. There are currently a few early sell signals so staying hedged or with a tiny short from here is a good idea. Stop out and go back to holding coin if this breaks the high from here, but watch out for a stop run. There will be more signals to sell on once this starts trending down.

IF the above count ends up being confirmed we will have completed a double combination and the possibilities from there are that we form an x-wave and drop down to around 790 USD and then continue to make new highs after that, OR if it's the end of the b-wave which began in January 2015 then we could drop as low as 300 USD. Only new information will be able to confirm which one happens but either way it's very likely we're nearing some sort of top here.
Comment: Also quarterly settlement is coming up tonight, we could see some end of the year profit taking soon. Also at this point with the price so high I'd be wary of counter-party risk. Exchanges love to get hacked when the price is bubbling up like this to prick the bubble.

The old count is still valid, and I just noticed this yuge harmonic. Of course, this could all fail, there are a few caveats to this count, mainly that the short-term momentum is pretty strong for a 5th wave, and there isn't really a clear extended wave, and we've gone pretty far for wave 4 to have been a limiting running triangle BUT the extended wave could be an exception and the other guidelines are not necessarily hard rules that have been violated SO it is definitely possible this count is correct.

With that said it could just give the appearance of being correct (like some of my earlier unconfirmed counts) and then from there it ends up ripping up very violently. So with that said, if this count does fail (i'd say if this breaks 7400 on this run then it is invalid) AND the harmonic fails, which would occur at roughly the same price, then this is cleared for take-off and we could probably break ATH from there fairly quickly.

BUT until that happens these patterns are bearish and are great risk to reward if you know how to reverse a trade. Something most people don't realize is that the failure of a pattern or a count sets up a trade in the opposite direction, and since the stop loss for these unconfirmed counts and harmonics are so tiny, we can almost always make back all of our losses and a profit from reversing.

A good trader does not need to worry about which direction the market is going because they are able to profit in either direction. Being wrong can be just as profitable (sometimes even more profitable) than being right if you are using the right strategy. There's a reason why people say "love your losses." A win/loss attitude is a mental roadblock to profits and enjoyment of life, real life is not so black and white.

We're also at the top of the channel so this could be very close to the top. It may have a couple more days of upside left in it, though, so it may be a good idea to wait just a couple days to see how this finishes developing before going short.

I've actually just come to the conclusion that the bubble we had in June 2016 was actually a double zigzag and NOT an impulsive a-wave, after examining it more closely on the 1hr chart. This fixes a lot of problems with my count, for example, that wave (a) had been retraced too deeply, and the wave starting in August also appears to be very corrective in nature, even now it could still potentially be a double zigzag with an extended c-wave (still this is mostly unconfirmed).

This chart is not a trade recommendation, however, the risk to reward is very great, and the potential for a reverse trade is very high because if this final harmonic resistance zone fails we are very likely to FOMO very hard. As usual its much safer to wait for a break down and a trend confirmation before taking any significant positions, I am just speculating on what the count could potentially be. Generally counts can be very difficult to decipher until the end because they can leave many possibilities until something gets confirmed, and in particular waves can be very difficult to predict the end of which is what this entire move likely is starting from Jan 2015.

This new count is of an expanding running non-limiting triangle that is likely part of a double combination. The likely hood of this pattern forming in this position is fairly low, so it may end up becoming invalidated, but for now its going to remain as a fairly resilient count that coincides nicely with the massive harmonic. Again if these patterns fail it is a good idea to get back in with the predominant trend and continue to profit off of this advance.


Thanks for a great analysis. Do you think bitcoin's deflation factor could affect its price dynamics, skew the charts upwards or something like that?
Intuit airatru
@airatru, The reason why the market cap is skewed upward like that is because more bitcoin's exist today than existed in 2013, so even though price is still lower than it was back then the market cap is higher because there are significantly more bitcoins now than there was back in 2013. So the chart will be skewed upward but it won't be the price chart it will be the market cap chart. If anything the constant minting of bitcoins puts downward pressure on bitcoin's price, however, currently the number of bitcoins increases at about 4% a year (drops to 2% in 3.5 years) and the rate of inflation of the dollar is about 2%, so that would mostly cancel itself out, especially while they are equal, eventually bitcoin will be deflationary compared to the dollar when mining is only producing less than the rate of inflation of the dollar (or if the FED raises their inflation target). That could put upward pressure on bitcoin's price but that likely won't happen for many years.

@Intuit, even if the dollars inflation is only 2%, the debt is going through the roof, its not as simple I think to only compare inflation when you can borrow 200 000$ from nothing, just by adding to the debt and paying interest on that. I guess this is not counted in the inflation being created. While with bitcoin the amount per year is finite.
Intuit Noobincrypt
@Noobincrypt, Inflation takes into account the debt. The government can also print dollars from practically nothing which contributes to inflation as well. Inflation is basically the devaluing of the dollar because new dollars are constantly being created. The reason WHY the government is printing so much money and has such a huge deficit is because if they didn't the dollar would be massively deflationary which puts negative pressure on asset prices. So to raise asset prices artificially the government prints money and adds to the debt in order to devalue the dollar, and that is pretty much how inflation is created. The FED then tries to target 2% inflation by printing money (or destroying it if inflation gets too high) and though QE and the deficit and other monetary policies. The logic behind the 2% target is that if they can keep inflation stable then asset price collapses should recover quickly because we won't fall into a depression which is when there is very high deflation.
@Intuit, I dont understand how bitcoins inflation rate, the creation weighed against whats there... is comparable to fiat and the literally endless supply in circulation (plus the billions that just disappear every now and again).

And also, they keep inflation at 2%, then double the debt in a few years, and just keep pumping assets... when will the madness end... "But dont worry, we still have 2% inflation so this 100 trillion we dont have is ok"
Intuit Noobincrypt
@Noobincrypt, "when will the madness end" that is the million dollar question, eventually hyperinflation is very likely with current monetary policy, especially if the conflicts with China and Russia begin to escalate into world war because our debt to GDP is about as high as it was at the END of World War II. The only way to finance the war that is likely to happen over the Middle East and the China Sea's is through either defaulting on the debt or printing money to finance the debt, both of which will lead to hyperinflation. Because the debt of not only the US, but China and Europe are so insanely high it will likely lead to hyperinflation of not only the dollar but of most types of fiat currency. Whenever fiat currency does begin to fail bitcoin is likely to have some insane gains, but fiat currency definitely isn't going to fail any time soon, maybe sometime after 2018 when the wars begin to escalate into more direct confrontations and superpowers are forced to immediately find a way out of their unplayable debt.
EW does not work well in the Bitcoin market unfortunately. Especially in a n extremely Bull Market were in currently
Intuit BitcoinGuru
@BuyBitcoin.WS, I'm not sure you know what you're talking about.
@Intuit, well LOL Youve been calling a short for over a month now and the price keeps going up.
While ive been calling to long in my charts. Anyways, good luck shorting a Bitcoin Bull market wont end up well for you
Intuit BitcoinGuru
@BuyBitcoin.WS, I recommend you look at the rest of my charts that have been pointing up, I haven't been shorting for awhile. Also congratulations.
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