A popular price-chart indicator known as the Bollinger bandwidth suggests the bitcoin could soon chart a big move – up or down.
The leading cryptocurrency has spent a better part of the last three weeks trading in the range of $50,000 to $60,000. The consolidation has worsened of late, with bitcoin bulls unwilling to lead the price action above $60,000 and bears struggling to force a break below $55,000.
Due to the persistent lack of clear directional bias, the Bollinger bandwidth, a price volatility gauge, has declined to a four-month low of 0.15. Bitcoin (BTC) witnessed big moves during the 2017 bull run each time the bandwidth fell to 0.15.
The indicator is calculated by dividing the spread between the Bollinger bands by the 20-day average of the cryptocurrency’s price. Bollinger bands are volatility lines placed two standard deviations above and below the 20-day average of price.
The metric dropped to around 0.15 in February, April, and late October 2017, just before price rallies. A similar reading in March, July, and September paved the way for market corrections.
The data tells us that the impending volatility explosion is agnostic to price direction – the big move can happen on either side.
Bitcoin’s ongoing range play looks quite similar to the early December consolidation below $20,000, which ended with breakout following the Bollinger bandwidth fell to 0.15.