Bollinger Bands Reveal Extreme Squeeze: Tactics to Profit


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Since the Bitcoin price reached a new yearly high of $31,840 last week, only to invalidate the bullish breakout within a few hours and fall towards $30,000, there has been a strange tranquility in the market. Already since June 23, BTC has been in the trading range between $29,800 and $31,300, with every breakout attempt to the upside and downside having failed within a very short period of time.

However, one of the most prominent technical indicators, the Bollinger Bands, predict that this calm may soon be over. Created by the esteemed trader John Bollinger, these bands provide invaluable insights into market volatility and potential price levels.

Bollinger Bands Predict Big Move For Bitcoin

The Bollinger Bands consist of three distinct lines on a price chart: the middle band, the upper band, and the lower band. The middle band is a simple moving average (SMA) that represents the average price over a specified period. The upper and lower bands are derived from the middle band, with the upper band usually set two standard deviations above the SMA, and the lower band set two standard deviations below it.

The primary purpose of the Bollinger Bands is to measure market volatility. When the price of an asset experiences significant fluctuations, the bands widen, indicating increased volatility. Conversely, during periods of reduced price movement, the bands contract, indicating lower volatility. This contraction is commonly referred to as a “squeeze,” where the upper and lower bands come closer together, forming a narrowing price channel.

When the Bollinger Bands squeeze, the potential for a significant price movement looms. The squeeze suggests that the market is in a state of temporary equilibrium, akin to a coiled spring ready to release its stored energy. The direction of the breakout determines whether it’s a bullish or bearish signal.

Up Or Down?

Glassnode, a respected on-chain data provider, highlighted today the current state of the Bitcoin market, noting a remarkably low volatility environment. The 20-day Bollinger Bands are experiencing an extreme squeeze, with a mere 4.2% price range separating the upper and lower bands. This suggests that Bitcoin is currently in a period of limited price movement, “making this the quietest Bitcoin market since the lull in early January.”

Bitcoin Bollinger Bands
20-day Bitcoin Bollinger Bands | Source: Twitter @glassnode

As Bitcoin investors may remember, the Bollinger Bands squeeze in January marked the end of a lengthy downtrend. After the FTX collapse, the BTC market was in a state of shock paralysis, which was ultimately resolved by Bollinger Bands squeeze, leading to a 42% price increase in 26 days.

The Bollinger Bands’ squeeze, combined with diminishing trading volumes, creates a scenario of mounting pressure in the Bitcoin market. As trading volume declines, the potential energy stored in this coiled spring intensifies.

According to the analysts at CryptoCon, the bullish scenario is the one to be favored at the moment. “When Bitcoin volatility gets low in a bear market, it’s very bearish. When volatility gets low in a bull market, it’s insanely bullish,” the analysts say. As Bitcoin is unanimously seen to be at the start of a new bull market, a strong move to the upside could be in store.

Bitcoin price
Bitcoin price trading sideways, 1-day chart | Source: BTCUSD on TradingView.com

Featured image from iStock, chart from TradingView.com





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