I have been calling for the Bitcoin correction for a very long time now and where others were investing at $18-$19k expecting it to just keep rising, I sat back and patiently waited for the correction waves to begin because to me, BTC was simply another financial asset making textbook moves in accordance with The Elliot Wave Theory.
You can see from my screenshot below that after BTC made the high, forming the head of a potential Head & Shoulders chart pattern, it fell quickly into a downtrend - making lower highs and lower lows. We have a small recovery, forming the right shoulder and then a further drop to the downside to break the neckline. - I never take a short position on the break of a neckline, I always wait for a Break + Retest and providing my entry requirements are met and price action is bearish, I would then look at taking a short.
BTC did make another attempt to break to the upside, retesting the neckline and it has so far held as strong resistance. It is highly possible that BTC will drop from here to make a deeper correction before any real recovery.
How Deep Will Bitcoin Drop?
If we look on the daily timeframe, we can see that price is on the final leg (Wave C) of the correction cycle and I am expecting completion of Wave C near $8k. However, price has found dynamic support on the daily 50ema so that is an area to keep watching. We want to see a clear strong break and close below the daily 50ema which would give confluence for further downside.
I hope this analysis has been helpful - I would be interested to hear some views from other traders and of course if there are any other pairs that you would like analysed, feel free to drop a message below.