On Aug. 17, Bitcoin’s worth dropped beneath the $29,000 mark, settling round $28,500. Whereas this decline might sound insignificant given Bitcoin’s traditionally unstable nature, the context of its latest buying and selling vary magnifies the significance of this transfer.
Bollinger Bands are a monetary device used to evaluate the value volatility of assorted property, together with Bitcoin. The bands comprise three strains — one central line and two outer ones. The central line on the chart represents the straightforward shifting common (SMA) of the asset’s worth, whereas the outer bands are decided by the usual deviation, a measure indicating how unfold out the costs are from the typical.
These bands widen during times of excessive volatility and contract throughout low volatility. These bands are a vital market indicator, serving to merchants establish potential purchase and promote alerts. When an asset’s worth strikes exterior these bands, it may point out a big worth motion within the breakout path.
August has seen Bitcoin’s worth volatility plummet to historic lows. Earlier than in the present day’s drop to $28,500, the higher and decrease Bollinger Bands have been separated by a mere 2.9%. Such a decent unfold has solely been witnessed twice in Bitcoin’s historical past. With the descent to $28,500, Bitcoin’s worth breached the decrease Bollinger Band, which stood at $28,794. Consequently, the Bollinger Band vary expanded barely to three.2%.
Historic information means that when Bitcoin’s worth breaks beneath the decrease Bollinger Band, it’s usually adopted by a swift restoration and an upward trajectory. This sample has been noticed a number of occasions, reinforcing the importance of the Bollinger Bands as a predictive device.
Moreover, each occasion of extraordinarily tight Bollinger Bands in Bitcoin’s historical past has preceded a notable worth swing. For example, a number of occurrences of equally tight bands have been recorded in 2016. This era was the precursor to the rally that propelled Bitcoin to its all-time excessive in 2018. Extra not too long ago, in January 2023, Bitcoin’s worth remained stagnant at round $16,800, with the bands indicating low volatility. Shortly after, Bitcoin surged, practically doubling its worth to $30,000.
So, what do these observations suggest for the market? The present tightness of the Bollinger Bands, mixed with Bitcoin’s worth motion beneath the decrease band, suggests a possible for a big worth upswing within the close to future.
The put up Bitcoin at $28.5K: Unpacking the importance of tight Bollinger Bands appeared first on CryptoSlate.