2018 Cryptocurrency Crash (Elliott Wave): Reduxhttps://redd.it/913xx6Since the all-time high set on 17-DEC-2017, the cryptocurrency Bitcoin bear market has now elapsed 7 months with a peak decline of 70% in value thus far.
The first leg of the crash from 17-DEC-2017 to 06-FEB-2018, saw a 70% decline where price collapsed from the all-time high of $19,891 to a low of $6,000 in just 51 days (BITFINEX).
Since the 06-FEB-2018 low, price has wandered sideways on diminishing volume and volatility, contracting into a triangle pattern. A triangle formation reflects a balance of forces creating a directionless resolve: an equilibrium and indecisive psychological state of mind between the bulls & bears, a period of consolidation as the market deliberates its next move.
Five waves are expected in a contracting triangle pattern, labelled as a-b-c-d-e waves. Under textbook Elliott Wave analysis, at least two of the five alternate waves are typically related to each other by the Fibonacci 0.618 golden ratio, and it appears wave-c and wave-e are the alternating candidates:
—wave-a: Rallied 95% from 06-FEB to 05-MAR, retracing a 50% Fibonacci of the downtrend wave that began on 06-JAN.
—wave-b: Declined 45% from 05-MAR to 01-APR, retracing a 95% of wave-a.
—wave-c: ‘April Fools Rally’: Rallied 55% from 01-APR to 05-MAY. In regards to length, it was a Fibonacci 0.618% of wave-a and terminated just shy of the psychological $10,000 level.
—wave-d: ‘Sell In May And Go Away’: Declined 33% from 05-MAY to 24-JUN. In regards to length, wave-d equalled a Fibonacci 0.786% of wave-b.
—wave-e: The final leg of the triangle pattern, and the shortest, has been underway since 24-JUN. Should wave-e equal a Fibonacci 0.618% of wave-c, it would do so at around $7,958 (BITFINEX) —and converging trendlines of the triangle suggest by mid to late JUL. It is common for this final wave-e of a triangle to either undershoot or overshoot the converging trendlines of the triangle. However, this wave-e must terminate below wave-c for the overall triangle to remain valid; i.e. below the MAY high of $9,990 (BITFINEX). Summary of targets to complete the triangle (BITFINEX):
Textbook:
@7873: wave-e retraces a Fibonacci 50% of wave-d
@7958: wave-e equals a Fibonacci 0.618% of wave-c
Overshoot:
@8372: wave-e retraces a Fibonacci 61.8% of wave-d
@8557: wave-e equals a Fibonacci 0.786% of wave-c
@9084: wave-e retraces a Fibonacci 78.6% of wave-d
Once the triangle completes, the second leg, and most devastating leg, of the cryptocurrency bear market is expected to resume with a breakout in volume and volatility —the crash redux. Taking out $7,330 may commence the second leg of the bear market, at which point signals time to exit all cryptocurrencies.
The Elliott Wave principle pinpoints the start of the ‘mania’ phase at $5,400 (BITFINEX) on 12-NOV-2017. At this level in time, price withdrew to create wave-4 as part of a 1-2-3-4-5 series of advancing waves:
From $5,400 to $19,891 manifests the steep parabolic price curve of the fifth and final wave. Therefore, taking out $5400 begins ‘capitulation’ of the earliest of public speculators and loyal hodlrs —amidst a volatile and instable marketplace surged in volume driven by margin calls, where mass media hysterics begin to peak reaffirming the ‘fear’ phase. Hence the psychological $6,000 has been guarded for the last +5 months since it marks support of the psychological USD$100 billion Bitcoin marketcap.
Initial expectation for the second leg bear market is towards $4,257 (BITFINEX) which marks a Fibonacci 78.6% retracement of the entire Bitcoin market which begins the ‘despair’ state of affairs; where reality of the bubble bursting only just is grasped as the 'blow-off' phase gains momentum.
From a political and socionomic standpoint, the following events termed as “FUD” may begin to unravel during the second leg of the bear market:
- Further laws/bans/restrictions upon cryptocurrencies invoked by countries/governments, calling for tighter regulation and fraud prevention: positive rulings, but perceived as negatives.
- Prolonged exchange outages preventing deposits/withdrawals and management of positions; including hacking and exploitation of security flaws.
- Exposure and collapse of further Ponzi schemes.
- Majority of Altcoins currently around US$2,000,000,000 market capitalization becoming extinct. Manipulated alt/BTC pairs at highest risk of collapse; see deadcoins.com
- Mergers & acquisitions of crypto companies, reduction of trading fees and margins/spreads, and launch of basket financial instruments (e.g. ETFs, index funds, etc), in the endeavour to revive and survive the market.
- Individual bankruptcies and suicides.
Based on historical manias, when a speculative asset bubble bursts, an approx 90%-95% collapse unravels in a period of 2 years:
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thebubblebubble.com/historic-crashes —
en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_marketsChronicles of historical manias suggest the cryptocurrency bear market is likely to conclude by late 2019 or early 2020, with Bitcoin priced between $500 to $1,000.
It is musing to project whether or not Bitcoin survives the crash.
Commodities and currencies, and assets deemed as a store of value, unfold in A-B-C Elliott Waves in both bull and bear markets. Whereas assets such as stocks based on earnings unfold in 1-2-3-4-5 impulsive Elliott Waves in bull markets, and corrective A-B-C Elliott Waves in bear markets.
The wave characteristics of Bitcoin and the popular cryptocurrencies have unfolded in 1-2-3-4-5 impulsive Elliott Waves in bull markets, and corrective A-B-C Elliott Waves in bear markets.
Given the nature of wave characteristics, this suggests the behaviour of cryptocurrencies cannot be considered as a currency nor a commodity; and so therefore in their current state, shall never be adopted as robust mediums of exchange for goods and services or as a storage medium of value.
Quite possibly, a second generation of viable cryptocurrencies may emerge in post 2020. Either way, the days of speculative parabolic price curves in the cryptocurrency markets is over, and any hopes of a return to the all-time highs is foolish hodlr's fodder.
Elliott Wave speculative models indicative of price and structure, not time; as follows:
