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Bitcoin's Bollinger Bands Tighter Than Ever

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Mon, 24/07/2023 - 10:52
Bitcoin's Bollinger Bands Tighter Than Ever
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With uncharacteristic tranquility, Bitcoin's market volatility seems to be at a historic low, according to a key technical metric.

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Noted cryptocurrency analyst Josh Olszewicz observed that Bitcoin's Bollinger Bands, a volatility indicator used in technical analysis, are "the tightest [they] have ever been on the weekly timeframe."

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Bollinger Bands are a type of statistical chart used to analyze the price and volatility over time for a financial instrument, with the tightening of these bands suggesting reduced price fluctuations.

Bollinger Bands consist of a simple moving average (SMA) line, with two standard deviation lines plotted above and below it. The area between the two bands represents the expected trading range of the asset.

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When the bands are narrow, it signals that the market is less volatile, and vice versa. In Bitcoin's case, Olszewicz's observation suggests that the cryptocurrency's price is currently in a phase of limited volatility.

Interestingly, this volatility contraction is not exclusive to Bitcoin. Olszewicz also mentioned that Ethereum (ETH), the second largest cryptocurrency by market cap, is experiencing the "tightest B-Bands on weekly timeframe ever."

This simultaneous constriction could indicate a broader market trend, making the crypto market more predictable, albeit less exciting for traders seeking larger swings.

Bitcoin exchange balances plunge

In a separate but related note, CryptoQuant has reported that Bitcoin exchange balances have dropped to levels last seen at the start of 2018.

The analytics platform states that "11% of the circulating supply is currently on exchanges," down from 17% in March 2020. This trend could suggest an increasing preference for holding Bitcoin long term, rather than trading it, further contributing to the current low-volatility environment.

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