Don't fumble the red flags, we are not out of the woods yet.
2025-01-03
Category: None

When analyzing cryptocurrency markets, maintaining a neutral and impartial perspective is crucial. Having an optimistic bias will have you  fumbling all the red flags  and focusing only on information that supports your hopes and dreams.

Currently,  two main theories  are shaping the discussion around Bitcoin's price action:

 
 Wave 4 has been completed, and we are now entering Wave 5 or;
 The market is still in a corrective phase.
 

Let me know what you think, would love to hear your thoughts. Let’s delve into the two scenarios in detail.

 Theory 1: Wave 4 is Complete, and We Are Entering Wave 5 
This theory is that Bitcoin has finished an ABC corrective wave and is poised for an upward move into Wave 5. A confirmed Wave 5 would be indicated by a price break above the previous Wave 3 high at $108,705. Until then, we remain in speculative territory.

 The Positives: 
 
 The Stochastic Oscillator on the daily timeframe is in a favorable position.
 On the weekly chart, the Stochastic has exited the overbought region and is moving toward oversold territory.
 

 The Negatives: 
 
 The current correction appears shallow and short-lived, failing to even retrace to the 0.386 Fibonacci level.
 Historically, 70% of Wave 4 corrections retrace between the 0.386 and 0.618 Fibonacci levels.
 I would prefer that the weekly Stochastic RSI had a bullish crossover in the overbought region.
 During the last bull run, the Wave 4 correction lasted three months and corrected nearly to the 0.618 Fib level. Bitcoin Dominance collapsed during the Wave 4 correction, signaling the start of an altcoin season. While history doesn’t have to repeat itself, we have only corrected for 3.5 weeks and bitcoin dominance is still high, these anomalies raise concerns until the $108,705 resistance is breached.
 

 Theory 2: The Market Is Still Correcting 
In this scenario, the Zig-Zag correction we’ve observed may represent the first impulse (Wave A) of a larger ABC correction. If this is the case, the market could experience:
 
 Wave B: A brief upward impulse.
 Wave C: A downward move to lower price targets.
 

 Key Observations: 
 
 A more extended and deeper correction would align with historical patterns, potentially creating a stronger foundation for future growth.
 If this plays out, we may see Bitcoin Dominance collapse, paving the way for an altcoin season to rise alongside Bitcoin’s eventual Wave 5.
 

 Conclusion: Watching $108,705 Is Key 
The confirmation of Wave 5 hinges on Bitcoin breaking the $108,705 resistance level. Until that point, it’s essential to remain cautious and consider both possibilities. Whether we are on the verge of a new bullish wave or navigating a deeper correction, understanding the broader market context will help investors make informed decisions.

My bets though are on Theory 2, what do you think?

