The price action of XRP and Bitcoin (BTC) is similar to a tightly compressed spring, turning on the crisis of dismantling with the sudden release of energy.
This is the message from an important volatility indicator called Bollinger Bandwidth. The Bollinger Band is a volatility band set to plus 2, minus the two standard deviations above and below the 20-period moving average (SMA) of the market price of an asset. Bandwidth measures the space between these bands as a percentage of the 20-day moving average.
For XRP, Bollinger's bandwidth has been reduced to the lowest level since October 2024 on a 4-hour chart where each candle represents a 4-hour price action. The 4-hour chart interval is extremely popular in the 24/7 crypto market, allowing traders to analyze and predict short-term price movements. Bitcoin 4-hour chart reflects the Bollinger bandwidth pattern in XRP.
A long-standing belief is that the tighter bollinger bandwidth, reflecting quiet times in the market, is similar to a compressed spring, ready for critical movements.
In these mild stages, the market accumulates energy that is ultimately released when a clear direction is established, often leading to a dramatic rise or a sudden drop in price/ Both XRP and Bitcoin surged from November to December after leaving bandwidth at levels comparable to the levels observed today.
That said, closer bands don't always show bullish volatile explosions. You can also foresee the sale. For example, the band tightened in October 2022, showing some important moves that were realized on the downside after the FTX became bust.
It is still unclear whether this latest spring compression will cause bullish volatility or whether both tokens will be led to tail spin. Recent comments from Federal Reserve Chairman Jerome Powell and sales by some whales support the latter.
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