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Bitcoin could soon break out of its seven-week trading range of $30.000 to $40.000, with an indicator tracking the cyclical nature of price volatility suggesting that a major shift is overdue.
- Bollinger Bandwidth, a measure of volatility calculated by dividing the spread between Bollinger bands by the 20-day average of the cryptocurrency price, dropped to a 2 1/2-month low of 0,15.
- Cryptocurrency saw big moves in December and April, after bandwidth dropped to 0,15.
- Bollinger bands are volatility bands placed at two standard deviations on either side of the 20-day price average.
- Bitcoin dropped from $60.000 to $48.000 after Bollinger's bandwidth dropped to 0,15 in mid-April.
- A similar reading in December paved the way for a bullish breakout with the multi-week price consolidation below $20.000.
- The cryptocurrency saw big movements during the 2017 bull run, each time the bandwidth decreased to 0,15.
- The movements signaled by Bollinger bandwidth are independent of direction, as history shows. This means that the anticipated change can be bullish or bearish.
- The next grayscale unlocks and data from blockchain pointing to a renewed purchase by wealthy investors indicate that this time the move will likely be bullish.
- The upside is expected to gain strength above the resistance of the 50-day moving average (MA), currently at $36.000.
- "We expect buyers to exceed the 50-day MA,” said Katie Stockton, founder and managing partner of Fairlead Strategies, in a weekly research note published on Monday. “A break above the 50-day MA would indicate a $44.000-$45.000 resistance test."
- A move below $30.000 could bring larger losses, she said, indicating that this is a less likely outcome.
- While concerns of an early reduction of stimulus by the Federal Reserve pose a downside risk, minutes from the June meeting of the Fed scheduled for release Wednesday's 18:00 UTC will likely not be as violent as the June policy statement.
- “Between the weaker US data and the Fed's desire to moderate hawkish bets, the Fed's minutes may sound more cautious and balanced than the FOMC statement and the Fed's projections,” said Kathy Lien of BK Asset Management, in according to FXStreet .
- According to a some analysts , bitcoin digested most of the negative news during the mid-May sell-off of $58.000 to $30.000. As such, the downside, if any, seems limited.
- Bitcoin is trading close to $34.700 so far, representing a 1,6% gain for the day.
Disclaimer: The views and opinions expressed by the author, or anyone mentioned in this article, are for informational purposes only and do not constitute financial, investment or other advice. Investing or trading cryptocurrencies carries a risk of financial loss.
