31 May 2023 01:46, UTC
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The meme-inspired cryptocurrency Dogecoin ($DOGE) has been noticeably lagging market-leading cryptocurrencies so far this year. A key chart indicator, the Bollinger bands, are now suggesting that there’s a looming price “storm” ahead for the memecoin.
According to analysis conducted by popular cryptocurrency analyst Satoshi Club, the bandwidth of the Bollinger bands, which is determined by the difference between the bands, suggests an explosion of volatility is coming.
🚀 Despite #Bitcoin and #Ether outperforming, #Dogecoin has remained calm this year.
🌩️ However, the Bollinger Bands, which measure volatility, indicate a potential storm ahead. The tightening bands and low bandwidth suggest a significant price move is imminent. pic.twitter.com/3223S1lzgO
— Satoshi Club (@esatoshiclub) May 29, 2023
Bollinger bands are a technical analysis tool that measures the volatility of a market. They consist of three lines: a simple moving average (SMA) of the price, and two bands above and below the SMA that are calculated by adding and subtracting a multiple of the standard deviation of the price.
The standard deviation is a measure of how much the price deviates from the average. Times of escalating volatility are characterized by a pronounced expansion in the gap between the two bands and a corresponding widening of the bandwidth. Conversely, when volatility ebbs, the bands tighten and the width narrows.
A bandwidth that is excessively broad or high may signal the approaching conclusion of the prevailing bullish or bearish trend. Alternatively, a notably low bandwidth might be an indicator of an imminent market swing in one direction or the other, as per the explanation provided by Fidelity.
Dogecoin’s daily chart indicates a recent convergence of the bands, reducing the bandwidth to a mere 0.06, a low that has not been seen since February 2019, according to the analyst. While DOGE’s price may soon see a price “storm” ahead, this doesn’t necessarily mean it will be either bullish or bearish.
As CryptoGlobe reported, earlier this month DOGE saw its daily transaction volume surge to a new all-time high, to the point that it surpassed the transaction volumes of the largest digital currency by market capitalization, Bitcoin ($BTC), and that of a cryptocurrency often seen as the silver to Bitcoin’s gold, Litecoin ($LTC).
Dogecoin’s transaction volume surged to a new all-time high as users have been looking to mint DRC20 tokens on top of the network.
Featured Image via Unsplash
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