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Home Cryptocurrency news Bitcoin

Nearly Ten Years of Decreasing Volatility in Bitcoin Suggests a Local Top Is Near

Tony Spilotro by Tony Spilotro
7 months ago
in Bitcoin
Reading Time: 2min read
bitcoin bollinger band
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Bitcoin throughout its short decade long history has been on a steady uptrend in price and in a secular bull market. But while price is rising, volatility has long been trending down.

But what are the reasons behind this trend, and what exactly does this mean for Bitcoin the near and long term?

Early Exponential Growth In First-Ever Cryptocurrency Leads To Diminishing Returns

The cryptocurrency asset class is a highly speculative set of digital assets known for wild price swings. The notorious volatility has long kept institutions away from Bitcoin, who prefer slower, more stable returns on investment through the stock market, and other long-term investment vehicles.

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But thanks to this speculative nature and wild price volatility, Bitcoin is the best performing financial asset ever.

Related Reading | Bitcoin Following Eerie Amazon Dot Com Fractal Would Lead To Retest of $20,000 Record 

Its returns easily beat Amazon, Apple, and gold.

Returns diminish over time as the asset finds its true value and adoption increases. As this happens, the volatility Bitcoin is known for has started to decline.

Top crypto analysts have been pointing out this trend for some time, and claim it is healthy for the long term growth of the first-ever cryptocurrency.

Bitcoin Volatility Continues To Decline, A Touch of Down Trend Line Could Act As Rally Peak

Relative volatility compared to the Nasdaq composite index has fallen to historic lows. The Bollinger Band Width is also signaling a sharp decrease in volatility over time.

The Bollinger Bands indicator created by market expert and analyst John Bollinger consists of a simple moving average and two standard deviations making up a top and bottom “band.”

Related Reading | Last Time This Formation Was Seen, Bitcoin Peaked at $10,500. It’s Back Again

Most price action takes place within these bands, and the middle SMA line can be used as a buy or sell signal when price passed through.

The tool is also used to watch for a squeeze in the bands, which often precedes explosive moves that cause a massive break in volatility stagnating.

Bands widen or contract depending on price action. Spinoff indicators such as the Bollinger Bands Width give a better visual representation of overall volatility.

BTC Weekly:

Spikes in the Bollinger Band Width have followed the down sloping orange trend line.

Additionally, these spikes in the BBW have also perfectly aligned with peaks in price.

Will this occur again?

Another tool amongst many to keep an eye on. pic.twitter.com/LCw6SCLm8I

— Nunya Bizniz (@Pladizow) June 9, 2020

According to Bollinger Band Width, each major peak in Bitcoin price has been repeatedly tapping a declining trendline.

After each touch, volatility drops further until another attempt to hit the trend line happens. Bollinger Band Width is currently trending below the ever-important line, potentially signaling that a local top is near in Bitcoin.

But before the leading cryptocurrency by market cap can touch that trendline, another spike in relative volatility and potentially another peak may be possible first.

Tags: bitcoinbollinger band widthBollinger bandsbtcusdBTCUSDTcryptoJohn Bollingerxbtusd
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a digital media executive and global remote work leader with a decade of content experience and excellent. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter and feel free to drop me a line if you would like to work together.

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