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Bitcoin Might Be in Serious Trouble Based on This Chart Indicator

Mon, 10/10/2022 - 15:29
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Tomiwabold Olajide
Bitcoin may be bracing for volatility spike and lurch lower
Bitcoin Might Be in Serious Trouble Based on This Chart Indicator
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If history is any indication, the biggest cryptocurrency in terms of market capitalization, Bitcoin, may be bracing for a volatility spike and a lurch lower. In recent months, Bitcoin — which is well known for its volatility — has been relatively calm, oscillating in a rather narrow range around the $20,000 level after it touched lows of $17,600 in June.

According to Bloomberg analysis, the Bollinger Bandwidth, a potentially ominous signal, has now shrunk to its narrowest since 2020. The bandwidth in a Bollinger analysis, a common method of determining volatility, is the distance between the upper and lower bands.

As a result, some analysts see the narrow Bollinger Bandwidth as a sign that Bitcoin price volatility might spike and, thus, reduce its price.

Bitcoin's Taut Coil
Bitcoin's Taut Coil

A nearly 60% decline in the price of Bitcoin this year resulted from a global wave of monetary tightening to combat inflation. Since touching a $3 trillion peak in November 2021, cryptocurrencies have lost around $2 trillion, which has forced regulators to tighten control.

Additionally, the world markets are anticipating Thursday's U.S. inflation data. A strong result might fuel expectations of additional Federal Reserve interest-rate increases, shaking up a variety of assets, while a significant slowdown might have the opposite effect. Market observers anticipate Bitcoin being largely macro-driven in the near term.

Bitcoin must sustain above $19K

Crypto analyst Ali claims that Bitcoin needs to hold the $19K support level to avoid a sharp decline. At this price level, 1.3 million addresses have purchased more than 680,000 BTC, and on-chain data indicates that there is little-to-no support below it.

At the time of publication, BTC was trading marginally down at $19,334.

On-chain analytics firm Glassnode reports that the on-chain cost basis for Bitcoin short-term holders has crossed below that of long-term holders. This might imply that buyers of BTC over the last five months now have a superior cost basis to those who "HODLed" through all the volatility of the 2020–2022 cycle.

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About the author

Tomiwabold is a cryptocurrency analyst and an experienced technical analyst. He pays close attention to cryptocurrency research, conducting comprehensive price analysis and exchanging predictions of estimated market trends. Tomiwabold earned his degree at the University of Lagos.