I was fascinated when I first came across this theory from the book, where I immediately began to see that nothing in the world operates on a linear level when you dig deeper for the truth.
Chaos theory is a mathematical concept that describes the behaviour of a dynamic system where the precursor events significantly affect its subsequent events. A random subset of cluster may not mean much but continue the observations and you can see groups of disorder as a construct of order.
How is this relevant to us?
I drew waves of smaller forming inside larger sets of . Looking at the start of the recent BTC reversal into the red region, I estimate a correctional wave represented by the Green A-B-C, with the obvious caveat that I cannot predict the future values of A, B, and C (wave is just for representational purposes).
But what is really going on inside these correctional waves?
To assist with your eyes, the forming rising up in 1-2-3-4-5 is represented by the teal lines, followed by yellow a-b-c correction waves. Leaping just one dimension above, we see that the teal and yellow waves contribute to a larger correction A-B-C wave represented by the orange dotted line, which how the market will likely take us to the larger correctional wave low point at Green A.
Why does this work?
The underlying concept of the Principle claims that a collection of the dynamic flow of a crow behaviour can predict the future patterns. If you remember what I said about chaos theory's underlying concept earlier in this post and apply that to the fragile mentality of cryptocurrency investors, it's no surprise why principle's effectiveness seems to be much more amplifed here.
At last, I leave you with the deary Jeff Goldblum https://www.youtube.com/watch?v=5cVLUPwrSmU.
Thanks for reading!