On December 10, 2019, I wrote the following (see here):
“A drop below the beginning of wave 2 (around $4,200) would invalidate the impulsive count of wave (5) because wave 4 cannot overlap wave 2 ...This would indicate a much greater likelihood that our second scenario is playing out.”
Since then, the price of bitcoins has dropped down to ~$4,000, fulfilling the above requirement. With the bullish count invalidated, the picture is becoming clearer. The cycle-degree bull market — from Bitcoin’s beginning to the ~$20,000 peak of late 2017 — is over. We are now in the last wave (wave ⓒ) of Bitcoin’s first cycle-degree bear market (the largest yet). Figure 1 shows the five primary-degree waves up (①, ②, ③, ④, ⑤) in wave I along with the three primary-degree waves down (Ⓐ, Ⓑ, Ⓒ) in wave II, with the end of wave II estimated.
Estimating the extent and duration of wave II is difficult and imprecise. There is no limit to how low it can go (except $0) because wave I started at $0. And there is no hard limit to how long it could take. However, corrections will often end in the price range of the previous fourth wave of one less degree. That was wave ④ from back in 2014. Its price range was $175–$1,240. The two previous bear markets (of primary degree) reduced prices by 86% and 94%. An equivalent reduction by wave II would take prices to $2,800 or $1,200. Wave Ⓐ of II reduced prices by 84%. An equivalent reduction by wave Ⓒ of II would take prices to $2,200.
In terms of duration, if wave Ⓒ lasts as long as wave Ⓐ, it will end around June or July 2020. However, waves (C) of ② and (C) of ④ (not labeled in Figure 1) were considerably larger than their respective (a) waves. If wave Ⓒ of II conforms to this pattern , it could drag on into 2021.
Figure 2 shows a closer view of wave II to date. Wave Ⓐ brought prices down to $3,200, and wave Ⓑ brought them back up to nearly $14,000. Wave Ⓒ should bring them to new lows below $3,200, completing wave II. I have tentatively labeled the move from the end of wave Ⓑ to the low near $7,000 as wave (A) and the counter-trend rise above $10,000 as wave (B). The low near $6,400 is not the end of wave (A), but is rather wave (b) of (B) in a pattern called a “running flat.” So now, we are in the final wave (C) of Ⓒ of II. A break below the major low of $3,200 will be a solid confirmation of this, at which point we will be trying to determine when the final low is in. This will be a major buying opportunity. If the price rises above the peak near $14,000, we will have to reevaluate our interpretation, but at this point that seems like a very unlikely scenario.
As noted before, the end of wave II will be accompanied by extreme pessimism and possibly antagonism toward Bitcoin on par with the extreme optimism that accompanied the end of wave I. It will take fortitude to buy in such an environment, but the rewards as wave III takes prices to new highs will be well worth it.
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