A little over three months ago an indicator called Bollinger bandwidth based on the weekly changes in bitcoin’s price indicated that volatility was rising. It was true that volatility increased before the debut of spot BTC exchange-traded funds in the U.S.

Bollinger’s bandwidth monthly chart has now carved out an interesting pattern that presaged Bitcoin’s near vertical rallies in 2016 and 2020.

Bollinger Bands were created by John Bollinger during the 1980s. They consist of three bands. The middle band is the simple moving average (20-period) of the asset price. The upper band is 2 standard deviations higher than the middle band, and the lower is 2 standard deviations lower.

Bollinger bandwidth is the difference between the upper and lower bands, measured in percentages of the moving average. A narrow width is like a spring that’s about to move a lot in either direction.

Since its inception, Bollinger’s bandwidth for the monthly bitcoin chart has been at 1%. Upturns have coincided with price rallies and bouts of volatility.

(TradingView/CoinDesk)

Recently, the bandwidth increased from 1% to 2%. This is a good development for bitcoin bulls.

The latest bandwidth pattern is similar to previous developments that preceded bull runs. However, this indicator does not tell us the direction of the price movement. It only indicates that it’s time for a big move.

Other words, past performance does not guarantee future results, and it is possible that a significant move in the opposite direction could occur.

Most analysts are bullish about cryptocurrency. They expect the newly launched spot ETFs will accelerate adoption, and raise prices to new records highs of $69,000 within the next year.

Oliver Knight is the editor.