After the steep drop in price in April and May of this year, in which the Bitcoin price almost halved, the crypto currency is consolidating in the range between 30,000 and 40,000 US dollars. However, two indicators suggest that Bitcoin could break out on the upside. Is there a good chance to buy here?
• Bitcoin is in the consolidation phase after the price plunge
• Bollinger bandwidth and stock-to-flow model could indicate an upswing
• Bitcoin community continues to be divided
Trapped in consolidation for months
Bitcoin has been in a trading range between $ 30,000 and $ 40,000 for about two months . Tweets from Tesla CEO Elon Musk , the increasingly harsh tone of the Chinese government towards the best-known cryptocurrency and the general decline in risk appetite in the markets had sent Bitcoin downhill after its all-time high in April. The situation has not eased since then and Bitcoin has only been moving sideways recently. An indicator that tracks price volatility now suggests that this sideways period may soon be over and a big move is imminent, according to Omkar Godbole of Yahoo Finance.
The Bollinger range
Bollinger Bands are a measure of volatility. They run as a standard deviation on both sides of the 20-day average price of a cryptocurrency or a share. The Bollinger Bandwidth is calculated by dividing the spread between the two Bollinger Bands by the 20-day average price of the cryptocurrency. This value recently fell to a three-month low of 0.15 for Bitcoin. When the indicator last fell to a range of 0.15, it was followed by big moves, according to Godbole. This was the case, for example, in December 2020 and April of this year, when Bitcoin started an interim rally. It is assumed that the Bitcoin when the 50-day average is exceeded, which is currently around 36,000 US dollars,
Another indicator also points to an upswing
The stock-to-flow model by crypto analyst PlanB, which is followed by over 600,000 people on Twitter , also shows that Bitcoin still has plenty of upside potential. The stock-to-flow model was able to predict the price development of Bitcoin in recent years with astonishing accuracy. According to the portal Cointelegraph.com, the current Bitcoin price deviates more than ever before from the calculations of the model. If you believe after adopting the model, Bitcoin should currently be around $ 80,000. – Trade Bitcoin with Plus 500 – this is how it works. 72% of retail investor accounts lose money when trading CFDs with this provider. You should carefully consider whether you can afford the high risk of losing your money. – Lex Moskovski, head of investment at Moskovski Capital, sees nothing negative in this deviation from the model, as he announced on Twitter. Much more, it is a great entry point for any investor who believes in the stock-to-flow model and Bitcoin in general.
What’s next for Bitcoin?
Bitcoin is still in a consolidation phase. Opinions remain very different among experts in the crypto field and within the online community. There are almost as many bitcoin bears as there are bitcoin bulls. So whether the indicators are right and Bitcoin can break out again, or whether the downward slide has not yet ended, remains to be seen for the time being.