Merchants bored of bitcoin {{BTC}}’s range-ridden days would possibly wish to return to their laptop screens. An indicator known as “Bollinger bandwidth” that successfully predicted the late 2023 volatility growth is glowing brightly once more.
Bollinger bands are volatility bands positioned two customary deviations above and beneath the 20-day/week easy transferring common of an asset’s value. The bandwidth, an unbound oscillator, is derived by dividing the unfold between the volatility bands by the 20-period SMA.
Bitcoin’s Bollinger bandwidth has declined to twenty% on the weekly chart, a stage final seen days earlier than BTC exited its then multi-month buying and selling vary of $25,000 to $32,000 in late October. Costs topped the $40,000 mark by year-end and rose to file highs above $70,000 in March this 12 months.
The most recent studying of 20% follows 4 months of buying and selling between $60,000 and $70,000, barring occasional transient dips to $55,000.
The bandwidth flashed the same studying forward of the volatility explosions in November 2018, October 2016, mid-105 and mid-2012, as CoinDesk discussed in October.
Volatility is alleged to be mean-reverting. So, a narrower bandwidth, representing value stability, typically precedes a breakout in both path or burst of volatility. On the flip facet, excessive bandwidth signifies a cooling interval on the horizon.
