Crypto: Tightening Bitcoin Bollinger Bands Forecast Explosive Price Move,...

The Bollinger Bands indicator has narrowed to its tightest level on record, a rare technical setup that analysts say is a sign of a pending directional move.

A key volatility indicator for Bitcoin (BTC) has narrowed to its tightest measurement on record, a pattern that was followed by a multimonth rally in previous bull and bear markets. Will the Bollinger Bands indicator call the market bottom again?

Analyzing the monthly Bitcoin chart, crypto analyst Dorkchicken noted that BTC’s Bollinger Bands are currently at their “tightest” level on record. Such conditions have repeatedly led to bullish breakouts, with the only prior downtrend from similar conditions occurring in 2022, during the drop to $16,000 from $20,000.

Bollinger Bands measure price volatility, and extreme compression often leads to a sharp expansion. The analyst added that there are higher odds of an upside trend once expansion begins.

On the contrary, Bitcoin trader Nunya Bizniz pointed to an approaching 50- and 200-period simple moving average (SMA) death cross on the three-day chart. A death cross occurs when the shorter-term moving average falls below the longer-term average, signaling weak price momentum.

Across the past three instances, the pattern marked drawdowns of about 50% over the following one to six months and aligned closely with final cycle capitulation phases.

A similar path may imply a potential bottom between March and August near $33,000. The trader also said that BTC has spent 110 days below its short-term holder cost basis of $89,800. During previous cycle lows, the price typically remained under that level for nearly 200 days on average.

Market analyst Ardi also noted that the long futures exposure from retail traders has increased on each dip to $68,000 from $88,000. Currently, 72% of tracked retail accounts are long into a descending trendline.

While this reflects early signs of market optimism, each recent surge in long positioning has been followed by a sharp sell-off. With positioning once again elevated, these longs remain vulnerable to liquidation, increasing the risk of a liquidity hunt if the price moves lower.

Related: Bitcoin 'roadmap to bottom' says $58.7K Binance cost basis now crucial

Source: CoinTelegraph