Bitcoin Analysis

9:50 a.m. New York time

What’s happening now? Bitcoin futures reached a higher high of 48,885 on February 9 and then pulled back. A trader I admire today suggested that the high was a signal to buy Bitcoin.

What does it mean? Bitcoin has been in an uptrend since January 27, from 29,075, a 68% rise in 13 days. By my count the uptrend is present in its middle stages, meaning there is a, probably shallow, correction ahead, followed by a push to higher highs. Once that rise is complete, it will mark the beginning of a significant decline, correcting the rise from March 13, from 4210.

What are the alternatives? Elliott wave counts are often ambiguous. It’s possible that today’s high is the end of the rise and the beginning of the correction, although by my count that’s not the case.

[Bitcoin futures at 9:46 a.m., daily bars, with volume]

What does Elliott wave theory say? By my principle count, Bitcoin is in wave 3 of Subminuette degree within wave 5 of Minuette degree within wave 5 of Minute degree. All of that is unfolding within wave 5 of Minor degree, which began on March 13, 2020.

So is the trader I admire right? I never recommend trades and am not doing so here. However, for an active trader interested in short-term results and nimble at making exit calls, 5th waves can be great opportunities. They sometimes extend for quite a long time. Under the rules of Elliott wave analysis, a 3rd wave can’t be shortest wave of the three waves moving in the direction of the trend (1st, 3rd and 5th). Wave 3 of Minute degree is already longer than Minute wave 1, so with Minute wave 5, in theory, the sky is the limit.

Or not. Minor wave 5 could be a truncated stump of a wave, and the correction could begin within a few days. Elliott wave analysis isn’t a prediction tool. It provides “You Are Here” marker and assesses the possible moves that lie ahead. Useful information, but anyone looking for predictions would do better to buy a crystal ball.

Learning and other resources. Elliott Wave International has long been the leading analytical house based on Elliott wave theory. They make available a number of free educational materials and other resources, in addition to their for-pay subscriptions.

I recommend two books, both by people associated with EWI.

First, Elliott Wave Principle by Robert Prechter and A.J. Frost is the book that, along with Prechter’s analyses, that created the revival of Elliott wave theory. I first read it in 1984, and it has had a profound influenced on my thinking about markets ever since.

Second, I’ve found Visual Guide to Elliott Wave Trading by Wayne Gorman and Jeffrey Kennedy, both of EWI, to be a useful book that relates Elliott wave theory to practical trading. The authors are hands-on Elliotticians, and for an active trader, that’s exactly what’s needed — less theory and more how-to. The first chapter of the book gives a very nice thumbnail run down of what Elliott wave theory is all about.

Terminology. Here are some links to information about some of the technical jargon I use.

Charts. On my charts, waves have a subscript showing the degree above or below the Intermediate degree. Here are the subscripts and the degree each represents:

  • {+3} Supercycle
  • {+2} Cycle
  • {+1} Primary
  • No subscript: Intermediate
  • {-1} Minor
  • {-2} Minute
  • {-3} Minuette
  • {-4} Subminuette
  • {-5} Micro
  • {-6} Submicro
  • {-7} Minuscule

By Tim Bovee, Portland, Oregon, February 10, 2021


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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