As crypto traders and analysts await the US inflation report for June, a technical analysis indicator called Bollinger Bands is signaling a potential volatility explosion in Bitcoin (BTC). Analyst Josh Olszewicz tweeted, Bollinger bands are tight. How tight? Squeezes of this caliber have only ever occurred a handful of times in the past decade. Most squeezes like this have tipped the market bias before the breakout. The inventor of the indicator, John Bollinger, has also taken note of the so-called squeeze or tightening of Bitcoin’s Bollinger bands.
Bollinger bands are derived by placing volatility lines two standard deviations above and below the 20-day simple moving average (SMA) of the asset price. When bands tighten sharply, traders prepare for a big move and usually trade in the direction in which prices breach the band. Bitcoin’s Bollinger bandwidth has declined to 0.04, the lowest since early January, according to the charting platform TradingView. According to pseudonymous analyst Nunya Bizniz, this has only happened a handful of times in Bitcoin’s 14-year history, and a volatility explosion may be imminent.
The US CPI data, scheduled for release on Wednesday at 12:30 UTC, will likely influence the Federal Reserve interest rate expectations and inject volatility into markets. Economists polled by Wall Street Journal predict the headline year-on-year CPI is likely to have cooled to 3.1% in June from May’s 4.0%, with the core figure slowing to 5% from 5.3%. If the inflation data matches estimates, Bitcoin may break out of the Bollinger band squeeze.