Why Bitcoin Rallied Amid Crypto-Related Bank Failures
Here’s “one thing that should jump out from the chart”
by Bob Stokes
Updated: March 15, 2023
Investors are often puzzled when a financial market acts in a way that's contrary to the news of the day.
Consider this March 13 headline (CNBC):
Cryptocurrencies rally despite shutdown of crypto friendly Signature Bank, bitcoin breaks through $24,000
As you may know, the shutdown of Signature Bank occurred in the wake of the failure of Silvergate, another bank which did a lot of business with the world of crypto.
So, with these crypto-related banks going down for the count, it seems the price of Bitcoin would be dropping considerably. Instead, it rose about 15% in a single day.
But, as Elliott Wave International has pointed out numerous times, financial markets do not respond to pure reason, or logic -- as in, bad news means the price of a financial market will fall. Or, good news means a financial market will rise. It just doesn't work that way. And, again this perplexes a lot of investors -- especially newbies.
Now, a financial market may fall when bad news is reported (or rise on a day of good news), but that doesn't mean the news was the "cause" of the price action. Correlation does not mean causation.
So, if news and events do not drive financial markets, what does?
The answer is investor psychology -- as reflected by Elliott wave patterns.
As Frost & Prechter's Elliott Wave Principle: Key to Market Behavior notes:
The Wave Principle is governed by man's social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.
Ah, predictive value!
Please don't read into that that the Elliott wave model can perfectly foretell every twist and turn of the future. No, no.
Yet, because the financial price patterns are repetitive, those familiar with the Elliott wave model have a solid basis for analysis.
But, back to Bitcoin specifically: Our March Global Market Perspective (published March 3) was not at all surprised by Bitcoin's strong upward move on March 13. Here's a quote from that issue:
One thing that should jump out from the chart is that the advance from the December low of $15,476 is a very clear impulse wave.
Keep in mind that an "impulse" wave is a wave which moves in the direction of the main trend, so our March Global Market Perspective analysis indicated that more upside was ahead for Bitcoin.
Notice that our analysis did not mention news about Bitcoin -- and we published it days before the two bank failures, anyway -- but strictly stuck with Elliott wave analysis.
Get our latest Elliott wave analysis of Bitcoin via our ongoing Crypto Opportunity Month.
Learn more by following the link below.
Take Advantage of Unfolding Elliott Waves in Cryptocurrencies
Our ongoing Crypto Opportunity Month is how you can do just that!
For 31 days in March, our Cryptocurrency Pro Service forecasters will update you on new opportunities in 7-plus coins:
Bitcoin, Ethereum, Litecoin, XRP, Cardano, Solana, Binance Coin, Polkadot + Special Crypto Opportunities
Yes, cryptocurrencies are often volatile -- yet, at times, volatility can bring big opportunity.
Get the details of Crypto Opportunity Month by following the link below.
The Treasury Bond: We Forecast the Turn From a 12-Year Low (plus what followed)
October 2022 saw a huge turn in Treasury Bonds. The turbulence since then includes the banking sector crisis. See our forecast on the day of this pivotal juncture -- plus what exactly what our Short Term Update has said in the time since.
Wheat Had the Ultimate Bullish Boost – War! So Why Did It Go Bust Instead?
When Russia invaded Ukraine, news stories said "no end in sight" to the spike in wheat prices. Yet prices soon went bust. Why? See the contrary chart and commentary we showed Commodity Pro Service subscribers.
PTPC: The Stock Market is Riskier Than Economists Realized
Everyone knows financial markets are risky. But just how risky are they? Economists thought they knew, but it turns out that they had underestimated market risk by several orders of magnitude. Discover why and learn about a perspective that can help you get a better grasp on risks in the markets and everyday life.