Bitcoin: “It fell yesterday, so it’ll fall tomorrow” Is NOT Forecasting
Linear extrapolation of financial trends is a common and perilous practice
by Bob Stokes
Updated: December 21, 2021
In 2021, there have been junctures in Bitcoin's price journey where observers either called for the cryptocurrency's demise -- or proclaimed that its price would reach some astronomical level.
Both extremes appeared to be based on hardly anything more than recent price action, or put another way, linear extrapolation.
On the other hand, Elliott wave practitioners avoid this error by anticipating price turns.
As Frost & Prechter's Elliott Wave Principle: Key to Market Behavior says:
The primary value of the Wave Principle is that it provides a context for market analysis.
For example, when Bitcoin slid from near $42,000 to $30,000 in January, a major financial magazine asked (Forbes, Jan. 27):
Bitcoin Has Crashed. Is This The End?
On Feb. 5, after the cryptocurrency hit its January bottom, subscribers to our Global Market Perspective were offered context. Here's a quote:
Our preferred [Elliott wave] count is that [Bitcoin] is advancing within the subwaves of a [larger up wave]... The [Elliott wave] correction played out for most of January. Wave evidence suggests that the correction ended on Jan. 22.
As you probably know, the digital currency went on to climb to as high as near $58,000 on Feb. 22. But, then, another sizeable decline followed. The price had dropped around $12,000 in just a matter of days.
But, yet again, Bitcoin bounced back and eventually hit an April 14 then all-time high of near $65,000.
Linear extrapolation was evident again -- this time on the wildly bullish side. Here's a notable example (Forbes, April 8):
Why Bitcoin Could Rocket To $400,000 In 2021
Yet, Bitcoin fell dramatically. That was followed by another linear extrapolation flip-flop (CNBC, July 1):
Most investors see bitcoin ending the year below $30,000, CNBC survey shows
A day later, our July 2 Global Market Perspective said:
Bitcoin [is] at or near the end of [an Elliott wave] correction.
Well before the end of July, the price began to advance.
The digital currency hit an all-time high north of $67,000 in early November and has since substantially declined.
Now is the time to look to our Global Market Perspective and the Elliott wave model for continued context so you can anticipate what's next.
Just follow the link below to get started.
Global Financial Markets Reach Pivotal Junctures
EWI's 25-plus global analysts expect historic shifts ahead for major global financial markets.
Yes, "historic" is a sweeping word -- but once you read our forecasts for global stock markets, cryptocurrencies, bonds, precious metals, crude oil and other asset classes, you'll likely agree that the word is fitting.
Financial history makes it clear that almost no one expects historic turns in major markets before they happen. That's why EWI strongly suggests that you not look to the mainstream financial press for guidance.
Instead, get an independent perspective. EWI's analysis and forecasts will serve you well in the months just ahead.
Follow the link below to learn how to get started with our professional-grade Global Market Perspective.
Global Market Perspective
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Gives you clear and actionable analysis and forecasts for the world’s major financial markets.
Get insights for the U.S., European and Asian-Pacific main stock indexes, precious metals, forex pairs, cryptos (including Bitcoin), global interest rates, energy markets, cultural trends and more.
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