Special Issue | Wall of Worry

Bitcoin continues to climb despite ongoing worry in financial markets.

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Special Issue overview:

• Bitcoin remains in an uptrend channel, despite this month’s volatility

• This “wall of worry” prevents investors from entering, while shaking out those that do

• Combining cycles and technicals with Elliott Wave counts in Bitcoin

• Certain altcoins are showing signs of coming strength – which coins?

• The DXY looks ready for a significant decline – here’s what to expect

Starting in 2022, the US Federal Reserve began hiking interest rates to fight inflation. Ever since then, the mainstream consensus has been that a recession is inevitable. Some even think that this won’t be a mere recession, but a systemic collapse more akin to the 1929 Wall Street panic and the Great Depression that followed. Recession indicators have been firing all along, yet the economy has shown resilience, allowing Bitcoin and the stock market to climb for going on almost two full years now. This fear-fueled rally has kept many investors sidelined, with even more shaken out due to ongoing volatility and time-based capitulation. After the latest bout of fear and volatility that caused a sharp price decline in crypto, Bitcoin has back above $63,000 and could be aiming for new all-time highs. The following is a detailed look at the “wall of worry” that Bitcoin has been climbing and a deep dive into the technical reasons for its existence.

Bitcoin’s Wall of Worry

In my opinion, this upward sloping channel is the most important technical structure in Bitcoin today. This is what I am referring to as the “wall of worry.” The foundation of the channel was first laid back during the November 2022 FTX collapse, which caused price to wick down to what is now the channel median. From there, a morning star pattern formed, prompting a reversal back into an uptrend. The uptrend first paused in April 2023, only to resume in October 2023. BTCUSD then spent six months soaring before selling resumed. The selling has been ongoing for six months and might have reached a climax a couple weeks ago when the VIX Volatility Index spiked and caused widespread panic throughout financial markets.

When the VIX spiked, risk assets took a beating and prices declined across the board. Bitcoin fell by roughly 20% in two to three days of trading. Altcoins lost as much as 50-70% in the same timeframe. The decline in BTCUSD was enough to cause price to pierce through the lower boundary of the upward sloping channel. For a couple weeks there, it appeared as though the wall of worry was broken. However, after US Fed Chair Jerome Powell revealed a less restrictive monetary policy this past week at Jackson Hole, Bitcoin recovered back into the wall of worry, leaving only a wick below it on the weekly and monthly timeframe.

Per Elliott Wave Principle, a commonly used practice in the field of technical analysis, channels can be used to potentially predict where the next wave might terminate. A channel can be drawn by connecting two recent swing highs of waves 1 and 3, then extending the lower channel boundary to the wave 2. The lower boundary of the channel should ideally project where wave 4 will terminate. Look closely at the figure on the lower right-hand side of the chart.

In the chart above, we can see that as expected, wave 4, if it has indeed concluded, came crashing back down into the channel’s lower boundary. When comparing to the updated figure located in the lower right-hand side of the chart, we can see that both wave 2 and 4 retraced back into sub-waves iii and iv of a lower degree.