Bitcoin (BTC/USD) managed to break the previous all time high around $19,000 before price action started dropping quickly.
Traders are probably grabbing profits at the resistance. But is the BTC/USD uptrend over? Or is the decline just part of a retracement? Let’s review the key Elliott Wave patterns.
The BTC/USD decline is probably completing a wave 3 (grey). Which means that the current retracement is expected to be a retracement. And that means: more uptrend.
That said, waves 4 are usually choppy, corrective and lengthy. A bull flag pattern or triangle pattern is typical. If this pattern does emerge, then an uptrend is very likely.
What if price action keeps falling? It would need to break below the 50-61.8%% Fibonacci retracement level before an immediate uptrend becomes unlikely (orange circle). A break below the long-term moving averages indicates a change of trend (red circle).
On the 4 hour chart, you can see the $3,000 drop that occurred earlier this week. The decline is showing strong momentum (red candles). But price action could easily bounce at the 38.2% Fibonacci level.
If it does, the main question will be: how far does price move up?
Once the pattern is complete, an uptrend (blue arrows) is expected unless price breaks below the 50% Fib support zone. In that case, hang on for more volatility (red circle).