Bitcoin’s Having A Bollinger Band Squeeze: Big Move Ahead.

Yesterday bitcoin didn’t do much: it finished up just 0.02% from where it started. And over the past couple of weeks, it’s mostly hovered within a narrow 5% range. But this chart shows another Bollinger Band squeeze in the works (blue circle). And that suggests bitcoin’s next big move is coming soon.

What’s a Bollinger Band squeeze?

Bollinger Bands show an investment’s volatility – or in this case, how much bitcoin moves around day to day. Wider bands mean higher volatility and narrower bands mean lower volatility. And when the bands squeeze together (like they are now), you get a Bollinger Band squeeze.

Volatility shifts between phases of high and low volatility. So when it gets really low (the squeeze), you usually get a big breakout move when that volatility comes back.  

So what comes next for bitcoin?

There’s an indicator in TradingView called the Bollinger Band Width Indicator. As the name implies, it measures the relative distance between the upper and lower band. Right now that distance is 0.06 for bitcoin – it ranges between 0 (lowest volatility) and 1 (highest volatility). In other words, bitcoin’s volatility is currently sitting on the floor.

It’s a pretty rare level of low volatility: apart from yellow and grey circles in the chart, it’s only gotten below 0.06 three times in the past three years. Typically, the lower the volatility, the bigger the move when volatility eventually returns.

As for which direction this move will go, trends tend to continue more often than not. And bitcoin’s trend is currently up. Still, I wouldn’t be surprised to see some kind of downside fakeout first as we did in February (yellow circle). Fresh US NonFarm payrolls data comes out tomorrow – perhaps that’s the catalyst that gets bitcoin back to work.