Public Chart: The Long-Term Look at Bitcoin

I don’t personally have any attachment to crypto. I don’t think it’s the future of the financial system or anything like that, per se. Personally, I think it’s a speculative asset that has a remarkable way of reflecting liquidity in the markets. And so I watch its structure in an effort to help me to influence my bias in a way that may favor the future direction of liquidity.

So let’s take a look at it, from inception.

From the very beginning, I think we can see a very clear 5-wave advance with excellent fibs up, down and sideways:

So one way or another, it seems pretty clear that something completed up there, some major structure. What we do not know is what those 5 waves up are. Do they compose a “1” of an even larger degree, or do they compose an “A” of a very large degree? We don’t know. But, it does look like something big and distinct has happened.

Let’s zoom in a bit to the decline off the all-time high.

I cannot find good fib relationships in the decline to count it as an impulse wave down. The only way I can get really good fibs is by counting the decline as a nasty, complicated corrective structure like this:

A large, A-B-C. And because of that, I have reason to believe that we either have arrived at, or are quickly approaching the end of the corrective structure as a whole.

From here, it is possible that the top of the market was a “1” of a larger degree, this a “2” of that same degree, and it would imply that we’re entering a ridiculous bull run as we enter a third wave of some stupendous degree, like this:

I am not so sure that that is possible. For a couple of reasons.

1. I’m not yet sure if the macro environment would support something like this, and
2. It’s also simply possible that this 3-wave decline off the all-time high is just the “first” wave of an even larger 3-wave decline

And given the fact that the full 5-wave advance lasted over ten years, maybe it would make sense for this decline, which is correcting that 10-year advance, to take more time. In other words we’ve certainly fallen enough in price to justify a correction of this degree, but has a one-year correction been enough time to correct a ten-year advance? Don’t know.

But let’s say that it is just the first leg of an even larger 3-leg decline. It may turn out to be something more like this:

Where this decline is the “a” wave (yellow degree) of a very large a-b-c (of some kind), and if this decline is completing as I think it is, we should enter some long-winded and complicated 3-wave structure for yellow “b” that may eventually go even as high as the orange box in the chart above (though it doesn’t have to).

And zooming in very locally, it looks like we’re in a triangle now (for Green B), and so it is possible that we have one more little drop in order to complete the structure:

It need not take out the June lows, but it may. And it is also possible that it’s already done and the orange “C” actually belongs where the Green “A” is now. There does happen to be a good fib there, too.

So, in sum, regardless of how I want to interpret this, if we are completing a large 3-wave decline, I would expect some kind of rally to come soon. And if this asset does in fact help us to gauge liquidity in the system, then I would have to believe that liquidity is about to improve soon as well. This is one of the reasons (and there are more) for why I favor the bullish bias right now in risk assets.