Bitcoin: The Return to Reality (BTC-USD)

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Bitcoin (BTC-USD) has been bleeding for months due to tight liquidity conditions and targeted selling of high-tech beta stocks. Low interest rates since the global financial crisis in 2008 have led markets to extreme assessments. Now the decade-long bubble broke out and assets are coming back to reality.

For most of Bitcoin’s existence, it has benefited from low interest rates. With rates rising now, the price of Bitcoin is suffering from the resulting uncertainty. In the short term, Bitcoin’s Wave 3 Elliott extension is signaling a drop to US$ 21 thousand. In the long term, the Bitcoin Price Cycle outlook implies an 80% drop to US$ 14 thousand.

Bitcoin all-time chart

Bitcoin all-time chart (TradingView 5-11-22)

In BitFreedom Search, We believe that the activities of the last 2.5 years will be remembered as the second dot-com bubble. The bubble burst in November 2021 when Bitcoin hit $68,990. Going forward, persistent selling pressure should kill off all elements of the cryptocurrency market that do not provide tangible value.

Long-term survivors of the crypto crash

While the underlying Internet technologies that powered the turn of the millennium dot-com bubble were solid, an overabundance of investments in space caused an eventual collapse. This same process has afflicted the cryptocurrency market and the crash is taking place right now:

LUNA, the first Crypto Crash crash

LUNA, the first Crypto Crash crash (TradingView 5-11-22)

Following the same rules that dictated the dot-com crash, we can infer that oligopolistic winners will emerge that will grow to dominate every sector of the Web 3. According to our own analysis, the following cryptocurrencies are the most likely to survive and thrive in the future:

  1. Bitcoin: the invention of digital scarcity, BTC is the purest form of “Digital Gold”. Bitcoin’s high-profile purpose is to be a store of value, and as such its price must follow the natural growth curve of the long-term energy law.
  2. Ethereum (ETH-USD): the first subscription of digital scarcity, Ethereum maintains a strong network effect to attract developers, investors and users. The Ethereum network uses ETH as gas to generate trustless verification of a wide range of transactions.
  3. Chain link (LINK-USD): The most widely used decentralized data network, Chainlink facilitates the transfer of tamper-proof data from off-chain sources to on-chain smart contracts. Decentralized data verification is a massive use case that could lead Chainlink to tether the world economy through its “cryptographic truth” application.
  4. Helium (HNT-USD): The largest provider of decentralized wireless infrastructure, Helium is building in preparation for a 5G world. By deploying low-power radio devices, Helium network participants provide coverage for IoT devices and earn HNT.

If we believe that these projects will be successful, it follows that there will be a maximum opportunity point (a bottom) at some point during the current bear market. To find potential funds, we are using Elliott Wave theory combined with Bitcoin Price Cycle theory.

Bitcoin Elliott Waves

Bitcoin Elliott Waves

Bitcoin Elliott Waves (Trading view)

Looking at Bitcoin’s daily chart, the asset is currently moving wave 3 (the most powerful wave) of its long-term corrective phase. Wave 3 normally spans 1.618 the length of wave 1. When mapped, this Fibonacci span implies Bitcoin will knock for US$ 21 thousand.

With Bitcoin at Wave 3, this implies a deeper move to Wave 5. To analyze how low a final Wave 5 might push Bitcoin, we are studying data from the asset’s 2 previous price cycles.

Bottom of Bitcoin price cycle

After each parabolic surge, Bitcoin declined from peak to trough by 80% approximately 1 year later. According to this move, Bitcoin should reach $14,000 between October and November 2022.

Bitcoin Price Cycle Analysis

Bitcoin Price Cycle Analysis (Trading view)

ONE graduate The difference between the current crypto bubble and the previous dot-com bubble is that the speed of the internet should make the downgrade and recovery of cryptocurrencies happen much faster. Because of this, we expect the entire bearish and bearish cryptocurrency market to conclude near the end of 2022. In keeping with the way bubbles usually burst, a drop below Bitcoin’s baseline uptrend (identifiable via 200-week simple moving average) can take Bitcoin as low as $14k.

Which projects are doomed?

From a conceptual point of view, Bitcoin is currently in Fear/Capitulation ‘Steps in a Bubble’ diagram zone. Because Bitcoin’s previous bull run was so long and unbalanced, the toxic aspects of the market must now die before everything can heal.

stages in a bubble

Stages in a bubble (Hofstra University)

The following bad actors represent practices of Greed, Illusion and New Paradigm that are typical of asset bubble tops. We expect each of these companies to collapse in the coming months:

  1. Inventory-Flow Model – an incorrect predictive model that promoted reckless speculation until 2021.
  2. MicroStrategy – The corporation secured a $205 million loan from Silvergate Bank on March 29 to acquire an additional 4,167 Bitcoins at a price of $45,714 per coin. The loan will be subject to a margin call if BTC drops to $21K.
  3. meme coins – examples include minimally developed play-to-win games, useless NFTs, and Ponzi scheme DeFi performance protocols.
  4. rehypothesizing – unprotected leverage in DeFi markets needs to collapse.
  5. Influential Investors – most social media platforms are full of crypto content creators who only provide optimistic perspectives as talking low hurts your view count.

In the future, each of these companies must die when Bitcoin returns to its baseline growth rate (the 200-week moving average).

Main conclusions

  • Bitcoin is currently moving wave 3 (the most powerful Elliott wave) that projects the asset to hit $21,000.
  • Due to the speed of the internet, the entire cryptocurrency bear market can be completed near the end of 2022.
  • A timely investment in any of the four projects mentioned above (BTC, ETH, LINK and HNT) should be highly profitable in the long run.

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