In a surprising turn of events, Dogecoin (DOGE), the beloved meme cryptocurrency known for its wild price swings, has been experiencing an unusually calm period this year, lagging behind the leading digital assets such as bitcoin (BTC) and ether (ETH). However, according to a technical analysis indicator called Bollinger bandwidth, this tranquility might be the calm before the storm.
The Bollinger bandwidth is a measure that illustrates the volatility relative to price gyrations. It calculates the spread between the Bollinger bands, which are volatility lines placed two standard deviations above and below the 20-day simple moving average (SMA) of DOGE’s price. The resulting figure is then divided by the 20-day SMA itself.
Typically, rising volatility is accompanied by a significant increase in the distance between the Bollinger bands, leading to a wider bandwidth. Conversely, during periods of low volatility, the bands contract, causing the bandwidth to narrow. However, when the bandwidth reaches an unusually low level, it suggests that a pronounced move in either direction is imminent.
Examining Dogecoin’s daily chart, the Bollinger bands have recently tightened, pushing the bandwidth down to 0.06, the lowest since February 2019. This indicates that DOGE could be on the verge of a volatility explosion, aligning with the bandwidth’s tendency to alternate between expansion and contraction.
It is important to note that the impending volatility explosion does not provide a clear indication of the price direction. The market could witness a significant move either bearish or bullish. Investors and traders need to be prepared for a potential shift in the status quo.
While Dogecoin’s price has remained relatively stagnant, with just a 3% increase this year, bitcoin and ether have enjoyed substantial gains of almost 68% and 60%, respectively. This contrast highlights the underperformance of DOGE, making it an intriguing subject for market watchers.
Considering the broader implications for the crypto sector, Dogecoin’s volatility explosion, whenever it occurs, is likely to have a ripple effect on the market. Crypto enthusiasts and investors will be closely monitoring the outcome, as it may signal a potential turning point for the meme cryptocurrency and influence sentiment across the wider digital asset landscape.
The memecoin’s remarkably low Bollinger bandwidth suggests that a significant shift in volatility is on the horizon. Market participants should brace themselves for a potential explosion in DOGE’s price movements, while keeping in mind that the direction of this impending move remains uncertain. As the meme coin’s calm facade persists, the crypto community eagerly awaits the storm that could reshape the Dogecoin narrative and reverberate throughout the entire cryptocurrency market.