Is the Bitcoin Correction Over After Strong Bounce?

Key Takeaways

• Bitcoin (BTC) bounced 7% after falling to a low of $89,164.
• The price sweped its lows and reclaimed the $92,400 support.
• Has Bitcoin completed its correction, or is there more downside?

Bitcoin started 2025 on the right foot, regaining some losses since the Dec. 17, 2024, all-time high. However, the price plunged on Jan. 7, continuing the ongoing correction. On Jan. 13, BTC fell to a new yearly low of $89,614.

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While this looked to cause a breakdown from the long-term support, the price bounced sharply and saved the $92,400 support area.

The sharp recovery raises the question – Is the Bitcoin correction over, or is the rebound just a relief rally? Let’s find out

Bitcoin’s Strong Bounce

The daily time frame Bitcoin chart shows that the price has fallen inside a descending parallel channel since its all-time high of $108,364 on Dec. 17. These channels usually contain corrective movements, meaning an eventual breakout is the most likely outlook after the pattern resolves.

On Jan. 7, BTC created a lower high, validating the channel’s resistance trend line. The same day, the price created a bearish engulfing candlestick, confirming the beginning of a short-term downward trend.

While the plunge halted after three days, it resumed on Jan. 13, leading to a low of $89,614, the lowest price since Nov. 17, 2024.

Nevertheless, the Bitcoin price regained its footing the same day, creating a very long lower wick and miraculously reaching a slightly bullish close. The bounce validated the channel’s support trend line and reclaimed the $92,400 horizontal support area.

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However, technical indicators do not confirm this bullish trend reversal. Neither the Relative Strength Index (RS) nor the Moving Average Convergence/Divergence (MACD) have generated bullish divergences.

The indicators are also below their bullish thresholds at 50 and 0, respectively.

So, analyzing different time frames and incorporating the wave count is needed to determine if the correction is over.

What Analysts are Saying

Bluntz Capital uses the Elliott Wave theory to ascertain that the correction is done. He shows a completed A-B-C correction and predicts the beginning of a new upward movement.

Income Sharks believes  that the decline was a bear trap and compares it to the August 2024 decline, which was followed by a sharp upward movement.

Inmortalcrypto  and Benjamin Cowen  both noted that the dip’s fully retraced status is an extremely bullish sign, especially when combined with the positive daily close.

Bob Loukas  is among the traders who are still bearish. He warns of caution since the price has not reached lower Fib levels and believes it could fall to $80.5k.

BTC Correction Could be Over

Bitcoin’s wave count suggests that the correction was part of wave four in a five-wave upward movement (white) that started in August 2024. The sub-wave count is in black. Yesterday’s low gave sub-waves W and Y the same length and almost touched the 0.382 Fibonacci retracement support level (yellow).

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So, the correction may have ended. If Bitcoin starts wave five, it could reach a high between $119,730 and $126,200.

The target area is created by the 1.61 external Fibonacci retracement of wave four and by giving wave five 0.618 times the length of waves one and three combined.

As for the long-term count, BTC is likely in the final portion of the upward movement that started in November 2022 (red). The end of the count will complete the entire bullish cycle, after which a lengthy correction is likely.

Based on the Fibonacci levels, wave five already has the same length as waves one and three, a sign the Bitcoin correction could be over. However, the shorter-term count predicts another upward movement.

If the long-term wave five extends, the price can reach a high of $142,000 – $148,900. This will give the long-term wave five (red) 1.61 times the length of waves one and three and the short-term wave five the same length as waves one and three (white).

So, Bitcoin’s short-term correction could be done. If so, the price might begin the final portion of its increase, which takes the price to $119,730-$126,200. An extension can lead to prices between $142,000 – $148,900.

Positive Weeks Ahead

Bitcoin staved off its breakdown by bouncing on Jan. 13, sweeping its range lows and creating a bullish structure.

While Bitcoin may create a slightly lower low, the correction is likely nearing its end. The first target for the top of wave five is at $119,730-$126,200

Disclaimer:
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.

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