Elliot’s Wave Theory is surprisingly simple. It was created by a man named Ralph Nelson Elliott who revealed that stock markets operated in repetitive cycles, pretty than unpredictably way.
So why do these repetitive trading cycles occur?
Quite simply because of the mass psychology of financial markets, that is investors operating within these markets broadly share the same hopes and anxieties, which means that they often react like a “HERD” to economic news events.
Elliott’s theory is based on the fact that the rise and fall of mass psychology always have the same repeating patterns. The up and down swings in price are called “WAVES”.
This tool is considered just one of the many that exist in order to be able to analyze the market for digital currencies or cryptocurrencies more easily, quickly and efficiently.
This statistical tool is not about calculations, rather, it analyzes the historical trends of financial markets, working under the premise that history repeats itself.
All trend movement is created by Elliot structures, it is said that the complete wave has 8 impulses divided into 5 impulsive waves in the direction of the trend and 3 correctives.
Thanks to methodological analysis, it is possible to calculate the course of prices, which has made it one of the main tools for predicting the performance of financial markets.
The latter is especially true when you combine technical analysis with fundamental analysis. Both types of analysis let traders to have a more complete taxation of the reality of the market and add bitcoin on your website.
What a big surprise for bitcoin
This wave model has been successfully applied to the prediction of the price of bitcoin on various occasions, and specifically during the upward cycle of 2017-2018 where the expected price levels were obtained according to the analysis of this model.
As we all know, if the spike is missed, the price of bitcoin goes down a lot quite quickly. During the downtrend, almost everyone pulled out. People thought that Bitcoin was gone. Somehow many people hung up their gloves before this economic phenomenon
They did not have the proper weight and after this downtrend, the price of bitcoin soared to unimaginable levels reaching USD 66,000 on October 21, 2021.
According to this model, the price of bitcoin would be in the corrective wave right now and this could not have yet reached the so-called support point from where it restarts its rise.
The “RED SPRING” of bitcoin began in mid-May when Tesla CEO Elon Musk, a staunch defender of the cryptocurrency to date, denied it due to the environmental impact of its mining and stopped accepting it as a form of payment for his electric cars, which sharpened the corrective Elliott wave.
Since then, any mention of Musk on Twitter has sunk the digital currency even further. To the point that for example, A broken heart emoji mentioning bitcoin caused the umpteenth disaster of the digital currency.
The technical situation for bitcoin is complicated. The cryptocurrency has plummeted as much as 13% ethereum, Cardano are also sinking even more strongly, testing the key support at $ 30,000. If this downward support is pierced, bitcoin could expect a fall to the ‘void’ to the area of 23,000-20,000 dollars, according to Javier Molina, spokesman, and analyst for the financial firm eToro
Comments on networks cause bitcoin to fluctuate
It is incredible how actions as simple as a message through social media platforms can affect the value and displacement of a crypto asset such as bitcoin, destabilizing all investors who faithfully believe in its bullish theory.
However, the question that the token followers ask themselves is until when this type of senseless and vain strategy will continue to affect the value of the cryptocurrency, dragging its value by the simple influence of an ex.
The only necessary thing to use this theory is to adapt to the characteristics and specific behavior of each market. In addition to this, technical analysis can be used on any chart, regardless of the time to be measured.
That is, it can be analyzed in the short, medium, or long term. These characteristics make technical analysis a tool easily adaptable to the needs of financial analysts and traders.