Bitcoin Update May 10, 2020
I usually post a podcast episode (Better than Bitcoin Podcast) on Sundays, but I am in my last week of college classes and am focusing on studying for finals so I don't have enough time to make a full production podcast episode. So, here's a quick update on my views of Bitcoin right now.
So on my last update (link below), I was talking about how I believed that I had reason to believe that this big Bitcoin rally needed a big pullback. Shortly after posting that, Bitcoin rallied a little bit higher to reach a top of $10,080. There was even before the pump up to that level, I saw a small opportunity to make a quick scalp trade with relatively low risk by only buying back in with a small fraction of my total capital. I made a quick 8% for that trade and walked away. I didn't catch the absolute top but I had the resilience to walk away and I am proud of myself for that. Even if the profit was small.
Once Bitcoin reached its peak of $10,080, it showed a drastic bearish divergence typically indicating that the end of 5 Elliott waves were done.
My primary count is that Bitcoin reached a local top of a bigger wave I and is looking for a deep wave II pullback. Elliott Wave 2's typically pullback 50-61.8% of the wave 1. But can be as shallow as 38.2% and be as deep as 78.6%. Of course since trading is all about probabilities, the further away from this "typical zone" the retrace is, the lower the probability it is of being a wave 2.
Another indicator that I saw that made me want to see a pullback was the RSI. Bitcoin's hourly RSI peaked during the top of the wave iii at a value of 95 out of 100, deep in overbought territory. Bitcoin had 7 weekly green candles indicating a strong uptrend for 7 weeks straight. As much as I love gains as much as everyone else, long term perpetual up-trends without a decent correction are not healthy for any market. Bitcoin is not excluded from this rule because we all believe it to be the future of money.
Anyways, as you can see in the chart above, Bitcoin had a massive 15%+ selloff on late Saturday afternoon. It increases the probabilities that the local top is in at $10,080 and will be looking down for the time being. Since Bitcoin hasn't broken and closed a candle below the 23.6% retracement level, it isn't guaranteed that it will only go down for the time being. Since Bitcoin loves massive volatility there is always the slight chance (in my eyes) that it can pump at anytime and rip people's faces off, mine included.
Now many people expected the famous Bitcoin halving event, where the number of newly minted Bitcoins are reduced by half, to be the start of a bull run and such. Long term, yes I believe this to be true with 10 years of price history to back this claim up. In the short term, I believe was overlooked in the last week or so. In Bitcoin's last halving in 2016, Bitcoin had a similar retrace into the same box after a strong pump leading up to the halving. The blue line below is the date of the 2016 halving.
But of course when you zoom out from Bitcoin's 2016 halving, on the longer term it started a bull run. So if you are spooked from yesterday's dump and trading isn't for you, then be assured that over longer periods of time, Bitcoin is the best performing asset period.
For a quick summary, I am looking for Bitcoin to reach the 50-61.8% retracement zone at 6235-5567. It could go lower and still be a valid term up-trend but in that box is where I will deploy my capital to snag some more Bitcoin. Invalidation of this uptrend is more probable if Bitcoin breaks and closes a candle below the 78.6% retracement level at 4738 and if that is broken it is more likely that we will see new lows below the major bottom at 3850.
For more context on what I saw before the drop, check out last week's post here: https://steemit.com/bitcoin/@divingman25/bitcoin-update-may-3-2020
Follow me on Twitter for more continual updates: https://twitter.com/jamiedubauskas
Subscribe to my podcast where I will be doing more episodes after finals week this week: https://www.youtube.com/channel/UC8i0EY5M_9NKdYMnS2Y0yqw?sub_confirmation=1