Michaël van de Poppe - 06 September 2022
Bitcoin's price action and Bollinger Bands explained
In this blog article, we will talk about Bitcoin and take a look at the 12-hour $BTC chart!
First, we will give a little background about Bitcoin for our readers who are new to crypto and our blogs.
When was Bitcoin invented?
The white paper of Bitcoin appeared in 2008. However, Bitcoin was launched in 2009. It isn't a coincidence that Bitcoin was found back then! Since the global financial crisis took place around 2007-2009. And therefore, the distrust of banks and central governments was at a peak.
Who invented Bitcoin?
Satoshi Nakamoto! There are many theories about who Satoshi Nakamoto might be. Some claim the name refers to a group of developers, and some believe it represents a single person. So the identity of Satoshi is still unknown.
What is Bitcoin exactly?
Bitcoin is the first and most widely recognized cryptocurrency. It uses peer-to-peer technology to operate with no central authority or banks. Bitcoins are rewarded to blockchain miners for the work done to verify transactions and can be purchased on several exchanges.
Now, let's take a look at the chart!
BTC/USDT 12-hour chart
Looking at the 12-hour chart, we see that BTC has broken the uptrend channel, ending the uptrend. Many speak of a bear market rally that took place from June 18 to mid-August. Since the uptrend channel has been broken, we can assume that BTC will continue its downtrend from here. In addition, there is still a lot of liquidity below the lows of $17.6k to $18.9k. BTC will likely seek this liquidity since the price is so close now anyway. Whales may well take this liquidity to initiate a new strong movement. This can be upward, but certainly also downward. So it is important to wait for the reaction when the price starts moving in liquidity areas.
Before we take a look at the next chart. We want to explain Bollinger Bands.
Bollinger Bands are a technical analysis tool that generates oversold or overbought signals. Bollinger Bands consist of 3 lines: a simple moving average (this is the middle band) and an upper and lower band.
The upper and lower bands are typically two standard deviations +/- from a 20-day simple moving average, this can be adjusted. When the price touches the upper band, it can indicate an overbought signal. If the price touches the lower band it indicates an oversold signal.
However, in the next chart, we look at the squeeze of the Bollinger Bands. When the bands come close together, so close to the SMA (middle line), it means that there is a period of low volatility. This can indicate a potential for future increased volatility and, therefore, possible trading opportunities!
In contrast to squeezing, bands can also move wider apart. This can indicate a decrease in volatility; therefore, you should consider exiting a trade. The bands don’t tell you anything about when the change may occur or in which direction the price could move.
So looking at the 12-hour chart and the TA tool: Bollinger Bands we can reinforce the above statements.
We see that the Bollinger Bands indicator confirms the compression. The BBW is at its lowest point in years, indicating that the price is becoming extremely tight. For this reason, we expect a powerful impulse movement to take place in the short term.
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