Dogecoin Chart Pattern Indicates Volatility Increase

Dogecoin (DOGE), a cryptocurrency known for its volatile price fluctuations, has displayed an unusually stable market performance this year, trailing bitcoin (BTC) and ether (ETH) by a wide margin. The Bollinger bandwidth, an indicator of technical analysis, suggests that this period of tranquility could be followed by one of increased volatility.

The Bollinger bandwidth is a measure of price volatility calculated by dividing the difference between the upper and lower Bollinger bands by the cryptocurrency’s 20-day simple moving average (SMA). Bollinger bands are lines two standard deviations above and below the 20-day simple moving average representing volatility.

The distance between the two bands increases as the volatility and bandwidth increase. In contrast, the band’s contract and bandwidth narrow when volatility is low. An unusually wide or high bandwidth suggests that an ongoing bullish or bearish trend is nearing its conclusion. In contrast, an exceptionally narrow or low bandwidth indicates that the market may be on the verge of a significant price movement in either direction.

Recent observations on Dogecoin’s daily chart reveal a narrowing of the bands, resulting in a bandwidth of 0.06, according to TradingView, the lowest since February 2019. This indicates that Dogecoin may experience an increase in volatility, consistent with the historical pattern of alternating bandwidth expansion and contraction. Notably, the anticipated volatility is independent of price direction and can manifest in either bullish or bearish price movement.

Dogecoin is currently trading near $0.073 and has a market cap of $10.22 billion. In stark contrast to bitcoin and ether, whose respective values have increased by 68% and 60%, its value has only increased by 3% this year.