When bitcoin came out, people thought it was the solution to the devaluing dollar. After all, dollars could be printed and only a limited number of bitcoins could likely ever be made.

It sounded good at first. And, I admit, I'd love a legitimate alternative to the dollar. However, bitcoin isn't it. Oh, one day, it might make a decent payment system, but that's not a currency. It would be more like an internationally accepted PayPal, except with Bitcoin as its agreed upon and internationally accepted payment.

Will we get there? Well, here's one huge problem. Right now, countries are backing away from bitcoin and some are outright rejecting it. Why? It's not regulated. It would have to be regulated by the governments of the world in order to be widely accepted.

The problem with that? The bitcoin-loving crowd is in love with it because it's not regulated by any government. If it begins to become regulated, the main people who like it will dump it because then it will be "on par" with every other regulated currency of the world, to a degree.

But right now, the rejection of bitcoin is on a massive scale. Sure, Germany, France, Norway, Sweden, Korea, Vietnam, Indonesia, etc. are all opposing it to some degree or another right now. But there are two HUGE ones that probably are bigger than all of the other ones mentioned combined.

The first one is China. That's what helped to cause the last bitcoin crash. The Chinese government rejected bitcoin and made sure their banks can't deal in bitcoin either. China has been one of the biggest bitcoin hubs in the world. Why? There are a lot of currency controls in China. There are only so many things people can do with their money when it comes to investments or how much money can leave the country.

However, when people took some of their money and bought bitcoins with it, those are untraceable and it made it to where the people could suddenly skirt the currency controls put in place by their government. But their government saw what was happening and helped to put an end to that.

So when the news came out about China rejecting bitcoin, that was a huge blow and bitcoin sold off big-time.

Yet, within a few weeks, bitcoin recovered from the 50 percent-plus drop that it had. Therefore, investors became bullish on bitcoin, similar to as before with a huge exception. At bitcoin's last peak, about a million bitcoins a day were being exchanged. (Picture that like volume on a stock chart).

But in the last number of weeks, that volume has been dropped down to 30,000 to 60,000 bitcoins being traded per day. So the most recent peak didn't have near the interest that the previous high had. And when volume dies off as a recent high is forming, typically a bad sell-off follows.

It was then that the next catalysts came for the next sell-off. 1. Apple got rid of all of the bitcoin wallet apps on their iPhones/iPads, etc. Now that's huge because of how widespread and how widely used iPhones and iPads are. 2. Mt. Gox, a large bitcoin exchange was getting a ton of withdrawal requests, which were causing them technical glitches because they couldn't even keep up with all of the withdrawal requests in a timely manner. So they halted all withdrawal requests for a period while they worked on getting those processed. Well, as you can imagine, that spooked the bitcoin market (almost like a run on the banks would).

So this is what we've got happening now, and its caused bitcoin to drop from $900 down into the $600s.

I was on CNBC on Feb. 7 and I told them on their Street Signs program that I have an initial target for bitcoin of $650, but an eventual target of $250 to $500 before it's all said and done.

Two things gave me that target:

1. Bitcoin coiled up into a triangle pattern on the chart over a six-week period. I knew that once the bottom of that triangle broke, that there was a minimum price target that these triangle patterns had. I measured it out and that's where I got the $650 price target. (Later on that day, I saw bitcoin hit $630. So the target was hit). But there was also another thing I noticed.

2. Those of you who have followed me for all that long know that I also look at Elliott Waves too. I could see that the latest correction, starting from its peak had formed an A-B-C correction. Wave A was the initial sell-off from early December to mid-December. This was when bitcoin dropped from $1,200 to briefly below $500. Well, wave Cs are generally anywhere from 50 percent as long as wave As are up to as much as 161 percent as long as wave As are. Well, the more conservative target takes bitcoin down to around the $500 level and the more aggressive target easily takes it to $250 or lower.

Wave Cs can see the steepest drops and cause the most panic. They can be the most unpredictable and that's why their ranges vary so much. But the important thing to note is that you don't want to be in anything during the early stages of a wave C. And as I'm writing, we're likely (at best) in the middle of wave C. The latter part of the drop can cover the most ground in the least amount of time too. So bitcoin's drop could get far worse before it gets better.

Therefore, it would be best to stay as far away from bitcoin as you can, in my opinion. So far, I've called all of its major crashes and this one has been no different. Don't get sucked into the hype. Stay away!

God bless!

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Ultimate Wealth Report. Discover more by Clicking Here Now.