The Missing Ingredient From A Full On Bitcoin Reversal

The Missing Ingredient From A Full On Bitcoin Reversal

News

Bitcoin price is back around $35,000 and has failed to retake $40,000 despite several low timeframe reversal signals building.

When looking back at past breakdowns following significant rallies, there could be a missing ingredient needed for a full on reversal, and it could have to do with the Bollinger Bands.

All About The Bollinger Bands And How To Use Them Effectively

The Bollinger Bands are named after the tool’s creator, John Bollinger. The tool has a variety of use cases as it applies to technical analysis, but is most notably used for measuring volatility. When the two outer bands – standard deviations of a simple moving average – begin to contract and tighten, it signals a massive release of energy is coming soon enough.

Related Reading | Could The Golden Ratio Provide Clues To The Bitcoin Bottom?

When the outer bands do expand, they also act as support or resistance, and the middle-SMA does the same. The middle-SMA can also be used reliably as a buy or sell signal when price action closes through it.

But it is that support and resistance that the outer bands often supply that might be crucial to forming a proper Bitcoin bottom and one that holds for new highs.

bitcoin bollinger bands

Bitcoin price action might require a touch of the lower BB as it has during past bear phases | Source: BTCUSD on TradingView.com

Why Bitcoin Price Action Might Need The Momentum Of The Lower Band

In the chart above, a touch of the upper band after “riding the bands” to new local highs has always resulted in a short-term top. Crossing through the middle-SMA from there switches from bull to