Bitcoin Bollinger Bands Herald Higher Volatility, What Next?

Bitcoin price has shown a strong reaction following the US Securities and Exchange Commission (SEC) lawsuits against Binance and Coinbase, which may have surprised many. In general, rising prices on negative news is a strong sign that the sell side is losing momentum and a bottom is near.

In the case of the Bitcoin price, however, there is still some concern in the market that could mean another, possibly final, downturn. For example, it is still unclear whether the US Department of Justice (DOJ) will also take legal action against Binance and what impact this will have on Binance’s international business.

The bullish case for Bitcoin is growing

Nevertheless, the bullish signals are increasing. As Glassnode co-founders Jan Happel and Yann Allemann write in their latest analysis, Bitcoin’s Bollinger Bands broadly reflect the current state. On the 1-day chart, BTC price remains within the accumulation zone, between the lower band and the 20-day moving average.

“This suggests that this is still a good entry point,” say the co-founders of the leading on-chain analytics service. At the same time, referring to the chart below, analysts warn that traders should be aware of the widening of ranges, which could herald looming higher volatility that could lead to abrupt moves.

Bitcoin Bollinger Bands Herald Higher Volatility | Source: Swiss block

Looking at bitcoin’s open interest, Allemann and Happel note that despite the strong reaction to the bad news, there is no clear direction for now:

We believe the price will continue to consolidate along with the open interest until we get closer to the FOMC and the market starts to position for the expected production.

Notably, next week’s Fed meeting – June 13-14 – will be the first in years without a clear consensus on interest rate decision. Since the Fed started raising rates, there has been a clear consensus at every meeting.

According to the CME FedWatch tool, futures have a 30% chance that rates will hike and a 70% chance that they won’t. The lack of clarity is also likely to result in greater volatility in the BTC price ahead of the decision.

BTC recently retested the 200-week moving average (MA) at $25,306, but supply liquidity has been a bit thin here. Also, if the price declines again, a retest of the 50-month ma at $25,898 would be very interesting where liquidity and sentiment appear stronger.

It is worth noting that BTC has already formed a double bottom at the 50-month MA. A triple bottom would be bullish. On the other hand, a loss of the 200-month MA would pave the way for Bearadise.

Bitcoin price at the crucial moment, 1-week chart | Source: BTCUSD on TradingView.com

In this regard, there are some very important days waiting for BTC in the coming week(s). A defense of the above price levels is paramount. If defended, a trip to bulls’ paradise could be next, but the bulls need to turn the tables in the lower timeframes.

Selected image from iStock, chart from TradingView.com

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