Using Elliott Waves for Bitcoin Price Forecast ?Elliott Waves are a commonly used technical analysis indicator.
Along with popularity, it has gained a certain degree of controversy over the years.Its usefulness in predicting the Bitcoin price is a subject of heated debate.Elliott Waves are based on the principle that one can predict the optimistic or pessimistic sequences of the market. It’s an open secret that the Bitcoin market is heavily influenced by psychology and speculation.Thus, it’s easy to believe that Elliott Waves can indeed be an useful tool in forecasting the Bitcoin price. With that being said, one must bear in mind the fact that Elliott Waves were invented way back in the 1930s with the purpose of predicting stock prices.
It could be quite erroneous for us to assume that the creator of the Elliott Waves could make his theory applicable for a then futuristic concept i.e. the Bitcoin.An eighteenth month study, to determine the effectiveness of Elliott Waves in predicting market trends, was conducted by a programmer and a market trader called Rich Sanwell in the year 2001.According to the study, we now know that investor psychology can be used to predict movements in the market.This shows that Elliott Waves, as a theory, is statistically valid.
However, Elliott Waves turned out to be not so reliable for trading predictions in the case of 65% of assets. The remaining 35% of the assets move according to patterns that can be deciphered by Elliott Waves.These are known to be influenced by greed or fear cycles. Robert Pretcher used Elliott Waves to make a famous prediction about the Dow Jones.
There is no data to let us know the amount of liquidity that is needed for an asset to be predicted by Elliot Waves. So does Bitcoin have enough liquidity to be understood by Elliott Waves and other technical analysis tools?Steven Poser, Vice President in Strategic Analysis and Market Data Group at NYSE Euronex, seems to think that Bitcoin does indeed have sufficient liquidity. He writes in his Elliott Waves book:“Shares of companies that trade by appointment must be avoided… there must be a crowd for technical analysis to work properly”The simplicity and swiftness of opening/closing position on exchanges that use BTC gives you a clear idea of bitcoin’s liquidity.The next question that one may ask is, is does greed/fear cycles have any considerable effect on bitcoin? Simply put, yes it does.This is because Bitcoin undergoes phases of relative stability and then shifts to a state of parabolic growth, which is succeeded by a sharp correction.
The correction ends above the pre-hype price, and then the cycle resumes again.Theory suggests that Elliott Waves can be used to predict Bitcoin patterns. In practice, it’s a much different ball game.Trading View Charts come in handy to traders who depend on Elliott Waves to predict Bitcoin patterns.
DanV is the perfect example of a trader who can make considerable profit trading Bitcoin with the help of Elliot Waves.It’s reasonable to say that bitcoin falls under the “35% assets” category that can be forecasted by Elliott Waves. Despite how good the theory sounds, the real life application of Elliott Waves with regards to Bitcoin is quite challenging indeed.
