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Today, Bitcoin’s Bollinger bandwidth hit a multi-month low. Is this an indication of approaching… [+] volatility? (Image courtesy of Chesnot/Getty Images)
courtesy of Getty Images
Bitcoin prices have recently been moving in a very well-defined range, but could a multi-month low in the value of a technical indicator portend a breakout? According to CoinDesk, the world’s most popular cryptocurrency has been fluctuating between $30,000 and $42,000 since late May.
“Bollinger bandwidth, a measure of volatility determined by dividing the gap between the Bollinger bands by the 20-day average of the cryptocurrency’s price, has plummeted to a 2 1/2-month low of 0.15,” reported CoinDesk reporter Omkar Godbole earlier today.
According to Godbole, similarly low values of this indicator preceded large rises in volatility.
[Editor’s note: Investing in cryptocoins or tokens is extremely risky, and the market is mainly unregulated.] Anyone thinking about it should be aware that they could lose their entire investment.]
Considerations for Bollinger Bandwidth
Analysts pointed out, however, that a low Bollinger bandwidth does not necessarily indicate an approaching breakthrough.
MORE FOR YOU According to David Keller, chief market strategist at StockCharts.com, “Bollinger Bands reflect market volatility, and a narrowing of the Bollinger bandwidth is a means of visualizing the decrease in volatility in recent weeks.”
“Price breakouts are frequently preceded by periods of lesser volatility. We observed this with Bitcoin and narrow Bollinger Bands in October and December 2020, just before major price gains, and again in April 2021, right around the peak.”
The topic was also discussed by William Noble, the principal technical analyst of research platform Token Metrics.
“The breadth of the Bollinger Bands is a useful indicator of how long, or how painful, a range trade has grown. With bitcoin BBW plunging to.15, you can see a numerical representation of the boredom that bitcoin traders are experiencing.”
He continued, “BBW can sometimes crash and stay at low levels for up to a month.”
“Just because the BBW is low doesn’t mean the range will terminate soon.”
Additional Indicators to Consider
Market observers can gain considerably from evaluating other technical indicators while looking at Bollinger bandwidth, according to Noble.
“You want to look for a reversal candlestick when utilizing Bollinger Bands,” he explained.
“If bears try to push the market lower, but bulls respond with a dramatic counterattack the next day, it’s an indication that bulls have control and the range may be coming to an end.”
“The disadvantage is the same,” Noble noted.
“For example, if bitcoin is trading in a tight range and there is a quick breakdown due to a stock market problem, the sudden shock of the down move can send bulls fleeing.”
“I would constantly cross-reference any instrument with other indicators,” Katie Stockton, the founder and managing partner of Fairlead Strategies, LLC, said.
When Bollinger bands “contract,” she says, “it’s time to keep a tight eye on levels.”
“So, I’d be looking for a breakout/breakdown between the 50-day MA and the 30K, with a breakout being more likely (in my experience) from an overbought/oversold perspective.”
Stockton wasn’t the only one who predicted a drop in the digital asset’s price, as Keller also predicted a drop in the digital asset’s price in the near future.
“Bitcoin’s chart is still in distribution mode, with lower highs and lesser momentum throughout much of 2021,” he said.
“Since May, Bitcoin has been trading below a downward-sloping 50-day moving average, signaling a general price decline. The tight Bollinger Bands indicate that a breakthrough is on the way, and the distribution characteristics indicate that the break will most likely be lower.”
“Look for $30,000 to remain a key level of support, and a break below $30,000 might lead to the next negative target of $27,000,” Keller cautioned.
I own bitcoin, bitcoin cash, litecoin, ether, and EOS, among other cryptocurrencies./nRead More

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