Dogecoin, the beloved meme cryptocurrency, has been rather subdued this year, trailing behind its counterparts bitcoin and ether in terms of price action. However, a technical investigation indicator known as Bollinger bandwidth is suggesting that this calmness might soon give way to a storm of volatility, a report in said.
The Bollinger bandwidth serves as an illustration of the volatility levels relative to price fluctuations. It calculates the ratio between the spread of the Bollinger bands and the 20-day MA (moving average) of the crypto’s worth. Bollinger bands, which are positioned both above and below the 20-day SMA, serve as indicators of volatility levels.
When volatility is on the rise, the space between the bands widens, leading to an expansion in the bandwidth. Contrarily, during periods of reduced volatility, the bands contract, causing the bandwidth to narrow. An exceptionally vast or increased bandwidth signals that a prevailing bullish or bearish trend is approaching its end. Conversely, an abnormally low bandwidth suggests that the market is on the verge of a significant shifting in either direction.
Analyzing Dogecoin’s day-to-day chart, it becomes apparent that the Bollinger bands have tightened recently, driving the bandwidth to 0.06, the lowest it has been since February 2019. This indicates that Dogecoin could experience a burst of volatility in line with the pattern of alternating contraction and expansion observed in the bandwidth.
It is worth noting that this approaching volatility eruption is agnostic to cost direction, suggesting that the impending move may be either bearish or bullish. As of now, Dogecoin is trading around $0.073, with a market value of $10.22B. Its price has only risen by 3% current year, significantly lagging behind ether and bitcoin, which have seen gains of 60% and 68% respectively.