As Dogecoin (DOGE) remains unusually calm this year, underperforming against market leaders such as Bitcoin (BTC) and Ether (ETH), many are left scratching their heads. However, one technical analysis indicator, the Bollinger bandwidth, suggests that this could be the calm before the storm.
The Bollinger bandwidth is a measure of volatility, calculated by dividing the spread between the Bollinger bands by the 20-day simple moving average (SMA) of the cryptocurrency’s price. As the bands widen and the bandwidth increases, it illustrates periods of heightened price volatility. On the other hand, when the bands contract and the width narrows, it shows a decrease in volatility.
A particularly high bandwidth suggests that the current bullish or bearish trend may be coming to an end, while an unusually low bandwidth indicates that the market could be on the verge of a pronounced move in either direction. With Dogecoin’s Bollinger bandwidth at its lowest level since February 2019, it seems apparent that there might be a significant price move just around the corner.
Dogecoin, currently valued at $10.22 billion, has experienced a modest 3% increase in value this year, while market leaders Bitcoin and Ether have gained 68% and 60% respectively. Trading at around $0.073, the world’s leading meme cryptocurrency could soon see a major volatility explosion, following the Bollinger bandwidth’s historical pattern of alternating between expansion and contraction.
However, it is essential to note that the impending price movement could be bullish or bearish, as the Bollinger bandwidth itself does not indicate a specific direction. Nonetheless, this technical analysis tool can be incredibly insightful for crypto enthusiasts and traders alike, who may be seeking clues about Dogecoin’s potential trajectory amidst its unexpected period of calm.
On the other hand, some have argued that the subdued performance of Dogecoin in comparison to its peers could be attributed to the mere fact that it is a meme cryptocurrency. Critics assert that it may not have the same long-term viability and value as other cryptocurrencies with more solid foundations.
In conclusion, while the Bollinger bandwidth indicates a possible significant price movement for Dogecoin, the direction remains uncertain. As such, traders and investors should continue to monitor market developments and exercise caution. As with any financial asset, the world of cryptocurrencies is subject to constant change and can be as exhilarating as it is unpredictable.
Source: Coindesk
