Let's count waves together, shall we ?

18 feb 2019

While it's near-to-impossible to predict price actions in the near-future, there are ways to detect the current market state on a macro level with a well-known theory : Elliot Waves. The main idea is that price follows a predictable pattern, a pattern that is dictated by market sentiment. Furthermore, there are only two types of waves: "Impulse" waves, which represent the main trend in a given market, and "Correction" waves which are, well, corrections. Each impulse is followed by a correction of similar strength, and each waves can be divided in smaller ones, in a fractal-ish fashion.
Concretely, the main theory tells us that each impulse wave can be divided into 5 smaller waves, and each correction into 3 waves.

Even though this theory is quite old, it is far from "getting" old as more and more analysts acknowledge that market follows some fundamental structure, to which Elliot Waves would be the signature. With time, market evolved and the then simple waves became more and more complex as the number of Elliot waves proponents grew larger; since people try to trade on theses macro-signals, it end up changing the shape of theses waves, even though the alternating pattern between impulses and corrections remained unscathed.

In order to know what's ahead of us, we must go back in time and count the waves that already happened: this can then tell us where we are, market-state-wise.

One thing is sure: there is a bullrun between 2017 and 2018. That's a no-brainer, price goes up, and we can easily divide it into 5 old-fashioned waves, ending at the 20'000$ peak. This helps us gauging the time-scale of theses waves, and helps us to identify the A-B-C correction that follows. This giant impulse wave (1-to-5), is followed by the February crash (A-B-C). what's next ?
Well, unlike the previous macro-waves, and given the extremely strong uncertainty in what historians will probably call the "Dot-com bubble 2.0", the following impulse wave took an unprecedented pattern: a triangle formation.
Elliot Waves would tell us that after the February crash, a new Bullrun would start. Some analysts were calling for a 25'000$ EOY which was at that time a conservative approach. That didn't take into account the countless scams and useless coins that plagued the market, and all the momentum has been killed by speculators and shady projects that needed to cash out their investors' cryptocash. Triangle formations are actually quite common, and is a form of consolidation that show that, indeed, the crypto-market is here to stay.
However, if this triangle is the impulse, then there must be a correction that ensues: welcome to the November collapse. As the triangle became clearer, market ended up noticing that 6'000$ wasn't a true bottom, and that further retracements were inbound. The ones calling for 2'500$, or even 1'500$, were in fact thinking (for good reasons) that this unprecedented price collapse was only wave A, and it could in fact be the case.

Or is it ?

We can clearly see that the recent price actions are now forming a perfectly clear ABC correction, taking roots on the 200-Weekly moving average, which has historically been ground 0 for Bitcoin. We even dipped our toes under that line when Bitcoin flirted with the 3'000$ mark. A few weeks ago, we were dangerously closing in with it again, which led to further bearish sentiments, fueled with mainstream outlets calling for a Bitcoin Death.

Crypto Wars VII : A New Hope

With the recent price actions, it really looks like the bear market is ending for good, and that 2019 will be the Year of Crypto. Numerous alt-coins has shown unprecedented strengths, with Binance Coin surging +50% within a month, Ethereum almost doubling and Bitcoin taking momentum.
We even had the first decent ICO earlier this year, with BitTorrent Token and his astounding 900% increase since its infancy.

Bears, beware.

I wouldn't advocate going all-in right now (unless you are looking for buy-and-hold candidates, which would be the safest way to invest in such a volatile market). However, one thing I'm sure is that it has never been riskier to sell anything than right now. Instead of entering a net short, I would instead recommend setting a laddered buy with different price strikes at the A-to-B Fibonacci levels, whichever you think is the most appropriate for your risk tolerance.

As always, stay safe. Don't take absurd risks for an extra %. Try to get that macro-view.
Lightning Network is gearing up, Bakkt is inbound along with Fidelity, more and more startups are emerging yet again, and it has become clear that some of us at least started accumulating already.

As for me, I'm tightening my seat-belt, strapped on the Bitcoin rocket-ship.
Farewell, crypto-bears ! See you in a couple years.

Kindly yours,
the Blockchain's Own Boy


TL:DR: The first 1-5 + ABC is the Impulse wave.
The triangle + ABC is its correction.
Bakkt, Fidelity, Revolut, Lightning Network, Plasma, transaction costs at its 2014 levels, transactions per day at its all-time high.
We have a golden-cross on daily, and double-bottomed on the 200-Weekly MA.

In the meantime, JP-Morgans turns sides and starts shilling his centralized, permissioned Ethereum rip-off. Please don't buy his "Just-Printing-Money"-Coin it's an insult to the Crypto-sphere.

==> Bear market is over.