After weeks of sideways consolidation, Bitcoin suffered a nasty breakdown from its vary and a ten% intraday plunge.
The state of affairs, nevertheless, might doubtlessly be a whats known as a “head faux” — that within the coming weeks reverses again to above $31,000. If not, a extra sustained downtrend can be potential.
Historic Bollinger Band Tightness Triggers 10% Crypto Crash
Bitcoin value has spent the final a number of months buying and selling round $29,000, after beginning the yr off with a powerful restoration from lows in January.
The file low volatility triggered the BTCUSD 1W Bollinger Bands to achieve the tightest within the cryptocurrency’s historical past. Low volatility phases all the time convey excessive volatility phases after they finish, so Bitcoin has been like a ticking time bomb able to explode in a single course or one other.
This setup within the Bollinger Bands known as a Squeeze, which is legitimate after a associated software — Bollinger Band Width — reaches the bottom studying within the final six months. Keep in mind, BTCUSD 1W hit the bottom ever.
The one drawback is, as soon as volatility arrived, costs exploded to the draw back, inflicting extra mass liquidations than through the FTX collapse. Is that this an indication of a return right into a bearish market, or might this be one thing referred to as a “Head Faux?”
Might this be a head faux? | BTCUSD on TradingView.com
Why Bitcoin Might Be Making ready A Head Faux Greater
In John Bollinger’s ebook Bollinger on Bollinger Bands, he exclaims “Dealer’s beware!” “There’s a trick to The Squeeze, an odd turning of the wheel that you just want to concentrate on, the pinnacle faux,” Bollinger warns.
“Usually as the top of a Squeeze nears, value will stage a brief fake-out transfer, after which abruptly flip and surge within the course of the rising pattern.”
Might this be what’s unfolding in Bitcoin proper now? Later, when discussing use the indicator take positions as a breakout system, he revisits the Squeeze.
“Usually what you’ll see is a Squeeze, adopted by a band tag, adopted in flip by the true transfer,” Bollinger explains. “Most frequently this may happen inside the bands and also you received’t get a breakout sign till after the true transfer is beneath method,” he added.
Because the chart above reveals, Bitcoin stays at a degree the place a head faux might happen, with value reversing greater to the higher Bollinger Band and shutting above it — producing a breakout sign. Bitcoin If Bitcoin continues down, the pinnacle faux is invalid. Thus, the subsequent two weeks are important in figuring out the “actual” rising pattern.
#Bitcoin Bollinger Bands had been the tightest ever and have solely simply began to broaden to launch volatility
However value went down. And has since paused. What subsequent? A potential “head faux.”
The low volatility state we noticed, adopted by a return of volatility, known as a “Squeeze.”… pic.twitter.com/aP5ugbdUQd
— Tony “The Bull” (@tonythebullBTC) August 22, 2023
