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Elliott Wave Theory, which provides an organized framework for examining market cycles and investor psychology, has been used by traders looking for hints about whether this rally can continue. With the asset soaring toward $120,000 and sparking a potential target close to $200,000, Bitcoin's price performance over the last few months has been incredible.
Elliott Wave patterns usually consist of a three-wave corrective sequence after five impulsive waves (motive phase). According to Bitcoin's daily chart, after consolidating around $65,000 the cryptocurrency seems to have finished a textbook motive phase that started in mid-April. Prices went from about $65,000 to $90,000 in the first impulsive wave and then there was a second corrective wave.
The third wave, which was probably the strongest leg of the impulse, sent Bitcoin into the six-figure range. With the recent breakout showing that the rally is intensifying on high volume, Bitcoin appears to be extending what may be wave five at this time. Volume spikes such as these usually validate Elliott Wave counts. They demonstrate how price is rising above resistance due to widespread participation, especially from institutional buyers.
However, traders need to exercise caution because a corrective A-B-C retracement frequently occurs after wave five ends, putting new entrants' conviction to the test. It's still unclear if this wave pattern can push Bitcoin to $200,000. Technically, Bitcoin may get close to that milestone if the fifth wave continues as it has in previous bull cycles, particularly in 2017 and 2021.
In the past, Bitcoin has had a tendency to rise significantly above previous all-time highs during blow-off tops. In this case, $140,000 to $200,000 is still a reasonable upward range if momentum continues. However, care must be taken. An impending corrective phase may be indicated by the RSI indicator's entry into overbought territory. Any decline in momentum or a breach of the ascending support trendline are early indicators of a wave (2) correction that you might want to keep an eye out for.
Dan Burgin
Vladislav Sopov
U.Today Editorial Team