Bollinger Bands, Why They Matter Right Now to Bitcoin
Despite Priced Stability, Bollinger Sees Breakout
John Bollinger is relevant, to Bitcoin. But how? Glad you asked.
Who is John Bollinger, and what are these “Bollinger Bands?” Bollinger’s Wikipedia introduction describes him well, stating “Bollinger is an American author, financial analyst and contributor to the field of technical analysis.” Specifically, he is the developer of the tool called “Bollinger Bands,” and his 2001 book Bollinger on Bollinger Bands, has been translated into eleven languages.
He publishes Capital Growth Letter, a newsletter providing technical analysis on the investment markets. It’s been around since 1987.
Much of Bollinger’s analysis has centered around volatility. As such, he has studied the measure of standard deviations around moving averages. These bands around moving averages provide relative definitions of highs and lows, in Bollinger’s words, that can be used to create rigorous trading approaches.
What are the Bollinger Bands telling us now?
Glassnode’s charts reveal that the Bollinger Bands, with respect to Bitcoin, are currently in their tightest mode since the beginning of 2023. Thus, volatility has been extremely low, as anyone following Bitcoin’s price will attest to.
(Twitter, or X, has been full of comments that Bitcoin is becoming a “$30,000 stablecoin.”)
This pattern of Bollinger Bands, which hasn’t been seen since January, is usually an indicator that a strong move is imminent. That’s what happened in January, a whopping 40% move to the upside in Bitcoin’s price.
(Did you remember that Bitcoin’s price was sitting at around $16,600 at the start of 2023?)
Analysts seem to agree that a breakout move may be coming, and very soon. What they don’t agree on, however, is in which direction that move may be. Sorry, don’t mean to be a downer.
“That is usually the condition you see before strong moves. Not sure about the direction, though.” - Aksel Kibar, popular Bitcoin technical analyst.
If you get the feeling that Bitcoin is ready for a big breakout move, you’re not alone. After all, Bitcoin has been known for its volatility. This extended period of relative stability is unusual in Bitcoin’s history. But what could set Bitcoin on its way to a parabolic move, what could be the catalyst?
Here’s a possibility. The approval of a spot Bitcoin ETF by the SEC. As I’ve written about before, there are at least eight applications pending, including some by the biggest asset managers in the world, BlackRock and Fidelity. Do they know someting?
Will the normal four-year halving cycle be the impetus that propels Bitcoin to a much higher dollar price?
Only time will tell, and analysts are not in full agreement. One thing is certain. Long-term holders are not selling. They are displaying more conviction than ever. With 70% of Bitcoin owners behaving like religous zealots, it’s hard to imagine a steep downward move.
Note - Bollinger hadn’t yet named his bands when Financial News Network host Bill Griffeth asked him what he called these lines on his charts. Bollinger just blurted out, off the cuff, “Bollinger Bands.” And the term stuck. It’s a tool that’s used by technical investment analysts around the world. And they’ve been around for 35 years.
Not investment advice. Do your own research. Only invest what you can afford to lose. And always, always, keep a long-term prospective.
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Issue No. 120, August 11, 2023
Rick Mulvey is a CPA, crypto consultant, and frequent contributor to Bitcoin Magazine. He writes about all things Bitcoin, and yells at the Yankees and Giants. He also runs marathons and makes wine, neither professionally.