BTC/USD Analysis

11:25 a.m. New York time

What’s happening now? Bitcoin futures continue a decline that began on March 28 from 46,550, reaching a low of 25,350 before rising slightly.

What does it mean? By my principal analysis, Bitcoin is on the last leg of a downward correction that began on April 14, 2021 from 65,520. When the correction is complete, the price will rise above the April 14 peak, most likely by a significant distance.

What’s the alternative? Corrections sometimes have more than one three-wave corrective pattern, linking together two patterns or three. If that should occur here, then the rise above the April 14 peak will be delayed. The first corrective pattern has so far lasted for more than a year, and I would anticipate that a second and perhaps a third pattern would each last a similar amount of time.

[BTC/USD futures at 11:25 a.m., daily bars]

What does Elliott wave theory say? Bitcoin is presently within wave 4{-1}, a downward correction that began on April 14. The correction is happening within uptrending wave 5{0}, which began on December 14, 2018 from 3,120.

The correction has taken the form of a Flat pattern, with five waves in the first internal movement, wave A{-2}, and three the the next movement, wave B{-2}. The final movement in the Flat, wave C{-2}, is now underway, has completed two waves internally, and is now on its third and final wave.

Fourth waves have a higher likelihood of a compound correction, with two or three corrective patterns, each tied together with a connector, called a X wave, than are 2nd-wave corrections. So while the most likely outcomes for wave 4{-1} is a single pattern, a compound correction of two or three waves isn’t out of the question.

However many patterns there might be, when wave 4{-1} is complete, it will be followed by a resumption of the uptrend, wave 5{-1}, which almost certainly will carry the price above 65,520. Fifth waves have no limit on how far they can travel, beyond the need to be more or or less of a similar magnitude as waves of the same degree. A 5th wave can be truncated, in which case the price will remain below 65,520, or it can be extended, in which case the price will rise far beyond present expectations. Or it could be a normal 5th wave, with five waves within it, which would carry the price a good distance above 65,520.

It is said that things are always darkest before the dawn, and the corollary to that is that dawn is always followed, eventually, by sunset and the dark of night.

Wave 5{-1} is the final leg of wave 5{0}, which began on December 14, 2018 and will end years from now. And the end of 5{-1} and its parent wave 5{0} will mark the beginning of a large-scale downtrend in Bitcoin, that will carry the price well below the wave 4{0} starting point, 3,120.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • Futures:
  • 5{0} Intermediate, 12/14/2018, 3,120 (up)
  • 4{-1} Minor, 4/14/2021, 65,520 (down)
  • C{-2} Minute, 11/10/2021, 69,355 (down)
  • C{-3} Minuette, 3/28/2022, 46,550 (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 15, 2022


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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