According to QCP Capital, Bitcoin is stuck in the bearish Elliott wave pattern despite a 47% rally

Bitcoin (BTC)’s resurgence this year has convinced many analysts that the crypto bear market is over and the path of least resistance is to the upside. QCP Capital suggests otherwise.

According to the Singapore-based crypto options trading giant, Bitcoin’s 47 percent year-to-date rally looks like a “bear breather” within a broader slide that began in November 2021, and the final leg of the bear market could soon resume.

The analysis is based on the Elliot Wave theory introduced by Ralph Nelson Elliott in his 1938 book The Wave Principle. The theory posits that asset price movements can be predicted by observing and identifying a repeating wave pattern.

Elliott found that market trends unfold in five waves, of which waves 1, 3, and 5 are “impulse waves” that represent the primary trend. Waves 2 and 4 are “return waves” that provide a temporary “breather” for the previous impulse waves. An important rule is that the first wave is usually about the same size as the fifth and the third wave is usually the longest.

In QCP’s analysis, bitcoin’s decline from the record high of $69,000 in November 2021 to the low of $39,000 in January 2022 represents wave 1, and the subsequent rally to $48,000 by March 2022 represents wave 2 – a bear break or a temporary partial retracing of the previous slide.

The plunge from $48,000 to the low of $15,480 in November 2022 represents wave 3 and the recent upleg represents wave 4 – a bear break similar to wave 2.

Next is wave 5, which according to QCP’s analysis could push the cryptocurrency to wave 3’s low of $15,480, if not lower.

“A potential double top is forming versus the August 2022 corrective high and the May 2022 reaction is low at 25,300,” QCP Capital’s Market Insights team said in an update published on Wednesday. “Beyond that, we have the huge resistance of 28,800-30,000 which is the head and shoulders neckline. Until these levels break, our 5 wave count still stands, with a final wave of 5 coming lower.”

QCP’s analysis comes a week after former Goldman Sachs analyst William Noble told CoinDesk that the cryptocurrency is primed for a rally towards $56,000.

Recognizing waves is an art. It’s a subjective call. Each wave can be broken down into sub-waves as seen below, making the analysis quite challenging compared to traditional Dow Theory.

QCP’s chart shows the five-wave bearish structure, with the fifth and final wave lower and yet to unfold.

Wave 4, identified by the year-to-date gain, has stalled at around $25,000, a resistance level trailing back to the August 2022 high. A reversal lower would now confirm a potential double as highlighted by QCP and could signal the start of the wave 5 sell-off.

The bearish five-wave structure will be invalidated if the ongoing wave 4 scales above the $28,800-$30,000 resistance range.

Bitcoin is changing hands for $24,300 at press time, according to CoinDesk data.

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