Bollinger Bands are undoubtedly at the top of the technical indicators that are frequently used in Bitcoin.
Named after its inventor, John Bollinger, these bands 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 overbought or oversold territory. When the price of the asset moves towards the upper band, this usually indicates overbought, when the price moves towards the lower band, it is usually 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.
At this point, John Bollinger, who examined the Bolinger Bands indicator on the Bitcoin chart, wrote that there was a squeeze in the BTC price.
The famous analyst simply wrote “SQUEEZE” in his post, stating that Bitcoin is stuck between the upper and lower bands of the Bollinger Bands indicator.
— John Bollinger (@bbands) July 10, 2023
This tightening is typically interpreted as a harbinger of significant price movements up or down.
While this tightness of Bollinger Bands can mean both bullish and bearish signals for BTC, it also depends on various factors such as market sentiment, future positive or negative news, apart from technical indicators, which direction the BTC will take.
At this point, the narrowing between the Bollinger bands is interpreted as the calm before the storm, while this narrowing shows that there is little volatility in the price.
CPI data to be released on Wednesday may act as a catalyst for this contraction to explode.
*Not investment advice.