It May Be Time for Bitcoin Traders to Focus on John Bollinger's Price Bands Again

Bitcoin's monthly chart Bollinger bandwidth resembles a pattern seen before the near-vertical rallies of 2020 and 2016.

AccessTimeIconFeb 1, 2024 at 6:41 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Just over three months ago, an indicator called "Bollinger bandwidth" based on bitcoin's weekly price changes signaled a volatility boom. Sure enough, volatility picked up prior to the recent debut of spot BTC ETFs in the U.S.

Now, the monthly chart Bollinger bandwidth has carved out a pattern that preluded Bitcoin's near-vertical rallies of 2016 and late 2020.

Created by John Bollinger in the 1980s, Bollinger Bands comprises three bands. The middle one is the 20-period simple moving average of the asset's price. The upper band is two standard deviations above the middle band and the lower band is two standard deviations below it.

The Bollinger bandwidth refers to the spread between upper and lower bands measured as the percentage of the moving average. A narrow width is akin to a tightly compressed spring about to make a big move in either direction.

Since inception, 1% has been a major low for bitcoin's monthly chart Bollinger bandwidth, with subsequent upturns coinciding with prolonged price rallies or bouts of upside volatility.

Bitcoin's monthly chart
(TradingView/CoinDesk)

The bandwidth has recently bounced from 1% in a positive development for bitcoin bulls.

Though the latest bandwidth pattern resembles developments before previous bull runs, the indicator, by itself, only signals that a major price move is due but doesn't tell us anything about the direction.

In other words, past results do not guarantee future performance, and the possibility of a large move to the downside cannot be ruled out.

That said, most analysts are bullish on the cryptocurrency, expecting the recently launched spot ETFs to accelerate adoption and lift prices to new record highs above $69,000 in the next 12 months.

Edited by Oliver Knight.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.



Read more about