After dropping to its 3-month low at the $6,000 level on February 6, Bitcoin is steadily recovering in the past week, even breaching a key resistance level at $11,500 and soaring to $11,800 before hitting a sell wall and dropping back to the $11,000 level. As of the time of writing, Bitcoin is currently trading at $10,600, with strong resistance at $11,800. A successful close above the resistance level would propel prices up to the $12,000 level. The latest price action in Bitcoin is interesting, especially when translated to the Elliott Wave Theory—a very powerful predictive tool.
Smart Money Buying In
According to analyst Alessio Rastani, the recent surge in Bitcoin prices that has fueled the recovery comes from smart money buying in to the cryptocurrency. Since the February 6 price drop, smart money started pouring in to Bitcoin. This is money coming from investors with more knowledge and familiarity with Bitcoin and the cryptomarket as a whole. According to Rastani, dumb money (money from FOMO-fueled investors) is still too scared to buy Bitcoin due to the huge losses they may have incurred.
Insights from the Elliott Wave Theory
What we are seeing in the chart is that the move to the $20,000 level is Wave 3. The sharp dive to the $6,000 level is not a bear market, as the mainstream media puts it, but a healthy ABC correction, which makes up Wave 4. The very strong bounce from point C shows that Bitcoin has found major support at the $6,000 level, which highly indicates that the Wave 4 is complete. This means that the recent price movement is the beginning of Wave 5. Following the Elliott Wave Theory, Wave 5 will be comprised of 5 smaller waves with higher highs and higher lows. As of the moment, we are seeing the 1st wave hitting the $11,800 resistance level and the 2nd wave settling at the $11,000 support level.
If you closely observe the Elliott Wave Theory chart, you can see that on Wave 5, the smaller wave from 2 to 3 has the highest strength in terms of movement. This indicates that on our Bitcoin chart, we can see a strong upward movement in price action that can take us to the $13,000 level, and even the $15,000 level. The indications from the Elliott Wave Theory is further supported the Moving Averages Technical Analysis.
In conclusion, the price action in Bitcoin is currently on a healthy trend upwards. More price increases would only confirm and strengthen the move to higher highs.
