Bitcoin: Five Waves or Three?Bitcoin / U.S. DollarFOREXCOM:BTCUSDMehdi_Abbasi_EWP# Bitcoin: The Difference Between a Five-Wave Impulse and a Corrective Structure ### Continuing the Previous Research: “Saddam Hussein’s Bad Trade: When Exiting a Position Becomes More Difficult” This article continues my previous research on decision-making and the difficulty of accepting that we may be wrong. I recommend reading the previous part first, because despite using different examples, both articles explore the same underlying principle: **We should not remain loyal to our initial interpretation; we should remain loyal to the evidence.** ## 1. Five Waves: Do We Really Have an Impulse? At the time, many analysts expected Bitcoin’s upward movement to continue. However, from the beginning, I had doubts about whether the bullish structure was truly impulsive. According to the Elliott Wave Principle, a standard impulse consists of five waves: waves 1, 2, 3, 4, and 5. However, simply identifying five consecutive price movements is not enough to confirm an impulse. Its internal structure must also comply with the applicable wave rules. Even if wave 5 fails to move beyond the end of wave 3, forming a truncated fifth, we must still be able to identify five internal waves at the lower degree. Another important factor is how price behaves after these five waves are completed. If an impulse has genuinely finished, we should expect a recognizable corrective structure to follow. This correction will often return toward the price territory of wave 4 of one lesser degree, although this is a guideline rather than an absolute rule. Therefore, identifying a truncated fifth requires more than its appearance on the chart. Its internal structure and the price action that follows are equally important. ## 2. Why Was I Expecting Wave 3 of Wave 5 to Accelerate? After wave 4 had completed, waves 1 and 2 of wave 5 appeared to be developing. At this point, I expected wave 3 of wave 5 to begin with considerable strength and acceleration—a relatively sharp move that would clearly display the characteristics of a third wave. In particular, I was watching for this acceleration around 12:00 to 1:30, based on the time window I was monitoring on the chart. However, that acceleration never materialized. For me, this was a warning sign. Once we identify waves 1 and 2 following wave 4, we need to see whether the next move actually demonstrates the strength and momentum expected from wave 3. We cannot simply label two movements as waves 1 and 2 and assume that wave 3 has begun. Price action must confirm the count. ## 3. The More Important Confirmation: Price Action After the Correction Even if we assume that five bullish waves have been completed, we still cannot confidently conclude that the market has finished an impulse. First, we need to examine the corrective structure that follows. Then we need to observe how price behaves after that correction is complete. If the market is genuinely developing a larger bullish structure, we should expect another five-wave impulsive advance after the correction. That is why the initial five waves were not enough for me. The corrective structure that followed—and, more importantly, the next impulsive move—also needed to support the bullish interpretation. ## 4. A Practical Example: When Buyers Failed to Regain Control After reaching its peak, price initially declined and then attempted an upward retracement. However, this recovery failed to demonstrate meaningful strength from buyers. At this stage, I was monitoring two bearish possibilities: the initial decline could have been a Leading Diagonal, or it could have been part of two nested bearish structures at different degrees. Price then broke below **79,854.92**, followed by a small upward retracement toward **79,457.21**. This area was particularly important. If the preceding decline had merely been a correction within an ongoing bullish move, this retracement could have completed wave B of an upward zigzag. In that case, I would have expected wave C to develop and buyers to show signs of regaining control. But that did not happen. Instead, price moved lower with increasing strength. Candle size and price action were also consistent with growing selling pressure—a move displaying the behavioral characteristics of a third wave at the same degree. Therefore, confirmation of the bearish scenario did not come from the break of a single price level alone; **the price action following the break was equally important.** ## 5. Could the Movement Have Been Part of a Corrective Zigzag? Alongside the possibility of an impulsive structure, we must also consider a corrective interpretation. One of the important corrective patterns is the Zigzag, which consists of three waves—A, B, and C—with an internal 5-3-5 structure: - Wave A: Five waves - Wave B: Three waves - Wave C: Five waves This means that a five-wave movement that initially appears impulsive may actually be wave A or wave C of a larger zigzag correction. A Leading Diagonal or nested bearish structures may also develop at the beginning of a downward movement. However, the initial appearance alone is not enough. The internal structure and subsequent price action must remain consistent with the rules of the proposed pattern. ## 6. The Bigger Picture: Bitcoin on the Four-Hour Chart Alongside the short-term example, the four-hour chart presents two different interpretations. From the previous high at **87,374**, one possibility is that Bitcoin is developing a complex correction in the form of a multiple zigzag, potentially completing near the price territory of wave **(4)**, slightly below it. Another possibility is that the advance from **57,735** to **87,374** represents wave C of an Expanded Flat. Under this second interpretation, the possibility of two nested structures at different degrees becomes important. If this interpretation is confirmed, we would expect selling pressure and downward momentum to increase. These two possibilities should not be confused with the short-term example discussed earlier. Here, we are examining alternative interpretations of Bitcoin's larger-degree structure. ## 7. Two Main Scenarios and the Lesson Behind This Research At this stage, I am monitoring two possible interpretations: **1. Two Nested Bearish Structures** Under this scenario, two bearish structures at different degrees could be part of a larger impulsive decline. If confirmed, we would expect the downward movement to continue and potentially accelerate. **2. A Complex Triple Zigzag Correction (W–X–Y–X–Z)** Under this interpretation, the market is developing a complex corrective structure. Three zigzags—W, Y, and Z—are connected by two intervening waves, X. Therefore, a downward movement does not necessarily mean that a larger impulsive bearish trend has begun. It may still be part of a complex correction. External developments, including reports concerning the Binance theft and conditions in the oil and gold markets, may influence overall market sentiment. However, these factors cannot replace the analysis of price structure. In the previous article, we examined Saddam Hussein’s story from *The New Market Wizards*. Following Iraq’s invasion of Kuwait, the situation changed dramatically as international pressure increased. Instead of accepting the changing circumstances and withdrawing, Saddam remained committed to his initial decision and ultimately paid a much heavier price. Jack Schwager uses this story to illustrate an important lesson: refusing to accept a small loss can eventually lead to a much greater one. A similar principle applies to financial markets. Our initial wave count may appear convincing, but if subsequent price action no longer supports it, we should not force the chart to fit our original interpretation. In this Bitcoin example, I had doubts about the bullish impulse from the beginning. Even identifying five initial waves was not enough for me. I wanted to see the corrective structure that followed and, more importantly, the next impulsive movement. **The main lesson is this: We should never ignore new market evidence just to defend our original wave count.** I do not need the market to be bullish or bearish. I need the structure to show me what it is becoming. **The structure must prove itself.** – Mr. Nobody 🎧📊 1 hour ago The Cost of Refusing to Exit: Saddam Hussein and the Psychology