Bollinger Bands are undoubtedly one of the most frequently used technical indicators in Bitcoin.
These bands, named after their inventor John Bollinger, are a popular technical analysis tool that shows whether the price of any financial asset is high or low.
Bollinger Bands indicate that an asset is in an overbought or oversold zone.
When the price of the asset moves towards the upper band, this usually indicates overbought, when the price moves towards the lower band, this usually indicates oversold.
In this context, the middle line of the three-line Bollinger Bands consists of the 20-day Simple Moving Average (SMA) of the relevant asset.
According to Coindesk, investors who expect volatility in Bitcoin may soon get what they want.
Because Bollinger bands have recently reached lows on weekly charts that have not been seen for several years.
Accordingly, analysts stated that BBW has recently reached a low level of 0.20 on the weekly chart and reminded that these levels were previously seen before the volatility explosions in November 2018, October 2016, June 2015 and June 2012.
BBW is calculated by dividing the difference between the upper and lower Bollinger Bands by the 20-week SMA.
At this point, an analyst using the nickname Game of Trades said the following in his post on his X account:
“Bitcoin recently witnessed its deepest weekly Bollinger Band squeeze, reaching lows not seen in several years.
Historically, major moves usually follow these levels. But at this point, determining what direction Bitcoin will take is the hardest part.”
Accordingly, investors should be careful that BTC may move in either direction after a burst of volatility.
*This is not investment advice.