Bitcoin (BTC) has experienced a strong increase in price since hitting a local bottom on June 15th. It is poised to break out of a nearly three-month-long consolidation pattern.
Despite this upward movement, the wave count indicates a continuing downward trend. Therefore, another significant decline may occur after the completion of the relief rally.
Descending parallel channel Technical analysis from the daily timeframe shows that BTC has been declining within a descending parallel channel since the beginning of April. Such channels are considered bullish patterns, so a breakout above the channel is the most likely scenario in the future.
On June 15th, BTC rallied (green arrow) at the confluence point of support levels around $25,000. This zone is formed by the 0.382 Fibonacci retracement level and a horizontal support area. Due to this confluence, it is an important support zone. Since the rally, BTC has moved above the midline of the channel.
The RSI (Relative Strength Index) is a momentum indicator used by traders to assess whether the market is overbought or oversold to determine whether to accumulate or sell an asset. Readings above 50 and trending upwards indicate a favorable buying bias, while readings below 50 indicate the opposite. While the RSI is below 50 but trending upward, it is a sign of a neutral trend.
Furthermore, the indicator has been oscillating freely above and below 50 since April 20th (marked). This is also considered a sign of an uncertain trend.
What do the wave counts show? Elliott Wave Theory and Fibonacci levels suggest a higher probability of price decline. Although there are still two possibilities, both indicate that the price has not yet reached the bottom.
Technical analysts use Elliott Wave Theory as a tool to identify long-term price patterns and investor psychology, helping them determine the direction of a trend.
The primary wave count indicates that BTC has been undergoing a corrective structure within the W-X-Y (black color) since late May. If correct, the current price action is in wave Y, which is the final wave before a price reversal.
There is confluence of three support levels near $23,300, making it a likely end for the correction.
First, the $23,300 region coincides with the 0.5 Fibonacci retracement level (white color). Next, the low near $23,300 would provide a 1:1 ratio for the W:Y waves. Finally, this zone aligns with the support line of the channel.
The alternate wave count indicates that BTC has completed a leading diagonal wave from the April high. While the pattern is completed, the leading diagonal is part of a larger structure, potentially being either an A wave or the first wave of a downward impulse.
As a result, this wave count suggests a short-term recovery in price. However, after the completion of the relief rally, another significant decline is expected, potentially reaching at least the $23,300 support zone and possibly lower towards $21,000.
Despite this bearish projection, a move above the yearly high at $31,000 (red line) would indicate a continuing upward trend. In that case, a move towards $40,000 would be the most likely scenario in the future.
