By
Mayowa Adebajo
June 17th, 2024
Bollinger Bands analysis comes at a critical time for Bitcoin, which surged by 12% in the last seven days and is currently trading only 6% below its peak price.
Renowned analytics platform Santiment recently stated that discussions surrounding Bitcoin on social media have increased amid the anticipation of the approval of the spot Ethereum exchange-traded fund (ETF). The market is seeing more buy calls than sell calls, indicating a growing optimism about the Bitcoin price trajectory.
When an asset sees a rise in buy calls among traders on social media, it often reflects positive sentiment for continued price growth. Traders view this as a good entry point, considering current prices as low and anticipating an upswing.
Temporary Sell-off Possible
Despite the positive social sentiment, newer investors, who lack strong conviction in Bitcoin’s long-term potential, often exploit the surge in buy calls as an opportunity to profit. This leads to possible temporary sell-offs as Santiment explains in an X post:
“Ideally, many weak hands panic sell here. Just a bit of FUD can help justify a new BTC all-time high (ATH).”
Bitcoin’s Market Value to Realised Value (MVRV) ratio currently stands at 153.19%. Notably, the MVRV ratio measures the relationship between Bitcoin’s current market price and the average price at which each token was acquired.
A high MVRV ratio suggests that Bitcoin is overvalued and that many holders are sitting on profits. This situation often leads to increased selling pressure as investors seek to capitalize on their gains.
Additionally, according to data by Coinglass, Bitcoin’s funding rate across crypto exchanges reached 0.018%, the highest level in a month. A rallying futures funding rate is generally bullish, indicating strong demand for long positions. However, an unsustainably high level can lead to forced selling by leveraged long positions, triggering potential corrections.
Bollinger Bands Creator Concerned
Renowned trader John Bollinger, creator of the widely used analysis indicator Bollinger Bands, has also expressed caution regarding Bitcoin’s immediate future.
Notably, Bollinger Bands plots standard deviations above and below a simple moving average and identifies volatility and potential price reversals. Recently, Bollinger noted a two-bar reversal at the upper Bollinger Band, a pattern often indicative of a temporary market correction.
While Bollinger’s analysis suggests short-term concerns, he remains optimistic about Bitcoin’s long-term prospects.
Bollinger Bands analysis comes at a critical time for Bitcoin, which surged by 12% in the last seven days and is currently trading only 6% below its peak price.
Prominent crypto analyst Rekt Capital stated that if a weekly candle closes above $71,500, it can kickstart the breakout from the Re-Accumulation Range. However, he also noted that historical trends suggest Bitcoin might consolidate within this Re-Accumulation Range for several more weeks.
The anticipation of the spot Ethereum ETF approval and the social media buzz bind investors to watch if Bitcoin can surpass its previous ATH.