The Bollinger bandwidth on Bitcoin’s monthly chart is exhibiting a pattern reminiscent of formations observed prior to the significant upward rallies in 2016 and late 2020.
Originally devised by John Bollinger in the 1980s, Bollinger Bands consist of three bands. The central band represents the 20-period simple moving average of the asset’s price. The upper band is situated two standard deviations above the middle band, while the lower band is positioned two standard deviations below it.
The Bollinger bandwidth measures the percentage spread between the upper and lower bands, akin to a compressed spring poised for a substantial move in either direction when the width is narrow. Historically, the 1% level has marked a crucial low for Bitcoin’s monthly chart Bollinger bandwidth, with subsequent increases coinciding with extended price rallies or periods of upward volatility.
In a positive development for Bitcoin bulls, the bandwidth has recently rebounded from the 1% level. While the current bandwidth pattern echoes previous formations ahead of bull runs, it’s essential to note that the indicator alone signals an impending major price movement without specifying the direction.
Caution is warranted, as past performance does not guarantee future outcomes, and the possibility of a substantial downward move cannot be discounted.
Despite this cautionary note, the majority of analysts maintain a bullish stance on Bitcoin. Anticipating that the newly launched spot exchange-traded funds (ETFs) will bolster adoption and propel prices to new record highs exceeding $69,000 within the next 12 months, analysts express optimism for the cryptocurrency’s trajectory.
