Bitcoin Bollinger Bands Herald High Volatility, What’s Next?

Bitcoin price has shown a strong reaction following the lawsuits filed against Binance and Coinbase by the US Securities and Exchange Commission (SEC), which must have surprised many. Generally, rising prices on negative news are a strong signal that the sell side is losing steam and a bottom is near.

However, in the case of bitcoin price, there are still some concerns hanging over the market, which could mean another, possibly final, slide to the downside. 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 argument for bitcoin is growing

Nevertheless, bullish signs are rising. As Glassnode co-founders Jan Happel and Yann Alleman Write In his latest analysis, Bitcoin’s Bollinger Bands pretty much reflect the current situation. On the 1-day chart, BTC price resides within the accumulation zone, between the lower band and the 20-day moving average.

“Which suggests it is still a good entry point,” says the co-founder of the leading on-chain analytics service. At the same time, with reference to the chart below, analysts caution that traders should be aware of widening bands that may indicate higher volatility that could lead to sudden moves.

Looking at bitcoin open interest, Aleman and Happel said there is no clear direction yet, despite a strong reaction to bad news:

We believe that the price will continue to consolidate with open interest until we hear from the FOMC and the market initiates positions for the expected output.

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

According to the CME FedWatch tool, futures show a 30% chance that rates will be raised and a 70% chance that they will not. The lack of clarity could also lead to more volatility in the BTC price ahead of the decision.

BTC recently reclaimed the 200-week moving average (MA) at $25,306, but supply liquidity was somewhat thin here. Moreover, if the price declines again, it will be very interesting to re-test the 50-month MA at $25,898, where liquidity and sentiment are strong.

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

In this regard, some very important days await BTC in the coming week(s). Protecting the above price levels is extremely important. If defended, a trip to bull paradise could be next, but the bulls need to turn the tables on the lower time frames.

Featured image from iStock, chart from TradingView.com