A Sober Perspective on Bitcoin's Downside Before a Leap Above $50K
As sensationalist headlines and bold bets, like Balaji Srinivasan's recent wager predicting that Bitcoin will reach $1 million within the next three months, continue to dominate the crypto space, it's essential to take a step back and examine the market through a more pragmatic lens. In this article, we'll delve into the potential downside for Bitcoin before it embarks on its next significant upward leg, and consider a sensible trading strategy to navigate the situation.
Down to the Key Level: A Potential Correction in Sight
While I am far from an Elliott Wave expert, it's worth exploring the possibility that the recent surge in Bitcoin's price might represent the first of five waves. If this is indeed the case, we could be in the midst of a corrective A-B-C formation.
How low can we expect this correction to go? Based on the current pattern, we might see a dip to around the $22,400 level. But predicting the exact bottom is always challenging, so let's examine some key levels where we could find potential entry points for long trades.
$24,385 – This level is undoubtedly crucial, boasting both daily and weekly levels. The daily level is fresh and untapped, while the weekly level has been tested but still holds potential for support. Moreover, the 21-weekly EMA currently lines up perfectly with this level, although it's worth noting that this could change over time.
$22,977 – This level represents the Point of Control (POC) for the broader upward movement, and an untapped monthly level lies just above it.
These two key levels are prime entry points for long swing trades. If the market behaves as anticipated, we could potentially ride the third wave, which is often the largest of the five waves. Conservatively speaking, I'd expect the third wave to reach at least $56,300 – but it could easily surpass that mark. Pinpointing an exact entry could yield a substantial risk-reward ratio for such a trade.
If Bitcoin's price dips to around $24,400, I'll pay close attention to price action and zoom in on the 5-minute timeframe to secure an accurate entry, provided the market cooperates. If the price plummets right through this level, I'll apply the same strategy around the $23,000 mark.
An alternative approach would be to ladder in on the two mentioned levels. However, I prefer the more hands-on method outlined above, as it allows for greater precision in entering the market.FF1A75