Why Bitcoin Risks a 40% Correction After its Retest of Bollinger Band Mid-Line

Tony "The Bull" Severino

4 years ago

2 mins read

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Bitcoin price is at a critical moment in its market cycle. And although it’s been said dozens of times before, the next move could choose the trend direction for months to come.

At this very moment, the asset is testing a level that in the past, rejection has caused a 40% drop on average. Will the first-ever cryptocurrency make it though the key resistance, or will another 40% collapse follow?

Bollinger Bands May Hold the Key To Bitcoin Bull Run

Bitcoin price has been trading sideways for months now, reaching historic low levels of volatility. The price action is a stark contrast to the large peaks and troughs investors in the asset class is used to.

The wild price swings of the last year have now stagnated, suggesting a major move is coming.

Bollinger Band Width, a metric measuring volatility or a lack thereof, has plummeted to record low levels. In the past, these lows have resulted in a major break of volatility.

The last time volatility was this low, was prior to the 2019 Bitcoin rally that took the asset to $14,000.

Also according to past price action, the asset has been strongly rejected from the middle Bollinger Band line.

Bitcoin price is once again trading just beneath the middle line on the Bollinger Bands. In the past, rejection from this key resistance level has resulted in an average of 40% decline.

Bitcoin BTCUSD 3D Bollinger Bands | Source: TradingView

Mid-BB Retest on 3D BTCUSD Leads To 40% Decline on Average, Black Thursday Drop

According to the Bollinger Bands, a popular technical analysis indicator, a strong rejection could occur. Past rejections at this level, have resulted in an over 40% decline on average.

Even more frightening for Bitcoin investors, the asset rejecting at the mid-BB line on the 3-day timeframe the last time around, resulted in Black Thursday.

Bitcoin price collapsed by over 50% following that rejection, taking the rest of the crypto market down with it. It also kicked off a correlation with the stock market that hasn’t boded well for cryptocurrencies.

Another 40% rejection from here, would take Bitcoin price back to as low as $5,600, where support must hold.

Support holding there, would result in a higher low, and put the asset back on track towards an uptrend. However, if that support level cannot hold, and the rejection gets even more severe than Black Thursday, a new bear market low could be set.

Bollinger Bands are used in a variety of ways, but a break below or above the middle-band, an exponential moving average, can act as a powerful buy or sell signal.

The moving average can also act as support or resistance. If the middle Bollinger Band line holds strong as resistance, another drop in Bitcoin could be next.

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
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In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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