XRP and Bitcoin are poised on the brink of a significant price explosion, as a historic volatility indicator signals a renewed period of explosive price movements.
XRP Price Coiled for a Significant Move as Key Volatility Indicator Mirrors 2024 Patterns
A standard deviation-based indicator points to renewed volatility explosion in XRP and BTC.
XRP is a digital currency developed by Ripple, a US-based technology company.
It is designed to facilitate fast and low-cost international payments.
XRP's key features include high transaction speeds, low fees, and scalability.
The currency is held in escrow by Ripple, ensuring its availability for transactions.
Over 200 financial institutions worldwide have adopted XRP for cross-border payments.
In 2019, XRP became the third-largest cryptocurrency by market capitalization.
The price action for XRP and bitcoin resembles a tightly compressed spring on the verge of uncoiling with a sudden release of energy. That’s the message from a key volatility indicator called Bollinger Bandwidth. Bollinger Bands are volatility bands set at plus two and minus two standard deviations above and below the 20-period moving average (SMA) of an asset’s market price.
Bollinger Bands are a technical analysis tool developed by John Bollinger in the 1980s.
They consist of a moving average and two standard deviations plotted above and below it.
The bands adjust to volatility, widening during periods of high volatility and narrowing during calm markets.
This indicator helps traders identify 'overbought' and 'oversold' conditions, trend reversals, and potential breakouts.
The bandwidth measures the space between these bands as a percentage of the 20-day moving average. In the case of XRP, the Bollinger bandwidth has narrowed to its lowest level since October 2024 on the 4-hour chart. The 4-hour chart interval is quite popular in the 24/7 crypto market, allowing traders to analyze and predict short-term price movements.
Bitcoin‘s 4-hour chart mirrors the Bollinger band width pattern in XRP. The long-held belief is that a tighter Bollinger band width, reflecting a quiet period in the market, is akin to a compressed spring ready for significant movement. During these calm phases, the market accumulates energy that is eventually released once a clear direction is established, often leading to dramatic rallies or sharp price declines.
Both XRP and bitcoin surged in November-December following an extended range-bound period that left their bandwidth at levels comparable to those observed today. However, tighter bands do not always indicate a bullish volatility explosion; they can also foreshadow a sell-off. The bands tightened in October 2022, signaling a significant move ahead, which materialized on the downside after FTX went bust.
It remains to be seen whether this latest spring compression will trigger bullish volatility or lead both tokens into a tailspin. Recent hawkish comments from Federal Reserve‘s Chairman Jerome Powell and selling by some whales favor the latter.
The Federal Reserve, also known as the 'Fed,' is the central banking system of the United States.
Established in 1913, it is responsible for setting monetary policy and regulating banks to maintain economic stability.
The Fed uses tools such as interest rates and quantitative easing to control inflation and promote employment.
Its seven-member Board of Governors oversees regional Federal Reserve Banks that manage daily operations.
With a balance sheet exceeding $4 trillion, the Fed plays a crucial role in shaping the US economy.
