I don’t think Bitcoin will roll over right away, but any gains are likely to be erased again in the future.
Here are two reasons why:
Crowd psychology
New products in a hot market often coincide with a level of euphoria seen towards market tops. The Bitcoin Strategy ETF (NYSE:BITO) seems to fit the bill.
We don’t have to look back far to find a similar example. Coinbase (NASDAQ:COIN), a hyped-up exchange for cryptocurrencies, went public on April 14 this year.
I distinctly remember watching a Coinbase TV commercial that projected the price of Bitcoin going through the roof, and I knew this could end badly (the Coinbase launch is marked in the chart below).
Bitcoin fell from $65,000 to $29,000 after that.
Elliott Wave Theory
On Sept. 22, I proposed the following Elliott Wave structure for Bitcoin futures (BMC).
Below is the original Sept. 22 chart, which shows a 1 - 2 setup followed by a strong wave three rally. As it turns out, Bitcoin prices are challenging the April 2021 all-time highs.
The rally from the June low should develop in five waves. Once the current wave three finishes, there should be a choppy wave four pullback followed by a wave five to new all-time highs.
Wherever the final wave five high will be (Bitcoin can extend to the upside), it may be the last hurrah for quite a while.
Conclusion
In short, aggressive traders can cautiously milk Bitcoin for further upside but should not get too attached to future gains. Support worth watching is around $55,000. A move below $53,000 (wave one overlap) would be a red flag.