A key volatility indicator for Bitcoin (BTC) has narrowed to its tightest measurement on record, a pattern that was followed by a multi-month rally in previous bull and bear markets. Will the Bollinger Bands indicator call the market bottom again?
Record Bitcoin Bollinger Band compression hints at volatility
Analyzing the monthly Bitcoin chart, crypto analyst Dorkchicken noted that BTC’s Bollinger Bands are currently at their “tightest” level on record. Such conditions have repeatedly led to bullish breakouts, with the only previous downtrend from similar conditions occurring in 2022, during the drop to $16,000 from $20,000.
Bollinger Bands measure price volatility, and extreme compression often leads to a sharp expansion. The analyst added that there are higher odds of an upside trend once expansion begins.
On the contrary, Bitcoin trader Nunya Bizniz pointed to an approaching 50- and 200-period simple moving average (SMA) death cross on the three-day chart. A death cross occurs when the shorter-term moving average falls below the longer-term average, signaling weak price momentum.
Across the past three instances, the pattern marked drawdowns of around 50% over the following one to six months and aligned closely with the final cycle capitulation phases.
A similar path may imply a potential bottom between March and August near $33,000. The trader also said that BTC has spent 110 days below its short-term holder cost base of $89,800. During previous cycle lows, the price typically remained below that level for nearly 200 days on average.
Market analyst Ardi also noted that the long futures exposure from retail traders has increased on each dip to $68,000 from $88,000. Currently, 72% of tracked retail accounts are long into a descending trendline.
While this reflects early signs of market optimism, each recent surge in long positioning has been followed by a sharp sell-off. With positioning once again elevated, these longs remain vulnerable to liquidation, increasing the risk of a liquidity hunt if the price moves lower.
Related: Bitcoin ‘roadmap to bottom’ says $58.7K Binance cost basis now crucial
BTC’s Sharpe ratio is interesting, but $70,000 remains the level to crack
Crypto analyst MorenoDV said that Bitcoin’s short-term Sharpe Ratio has dropped to -38.38, matching levels last seen in 2015, 2019, and late 2022.
The Sharpe ratio measures the risk-adjusted return, and deeply negative readings mark periods of deep drawdown and volatility. Each extremely low ratio signal has aligned closely with the major cycle lows, leading to strong BTC rallies, with the analyst noting that the current price range may be a “generational buy zone.”
Glassnode data calls for confirmation through a stronger BTC demand absorption. Since early February, each move above the $70,000 level has stalled as the net realized profits exceeded $5 million per hour.
Glassnode added that in Q3 2025, profit-taking between $200 to 350 million per hour did not interrupt the advance to new highs in Q4.
Related: ‘Resilient’ Bitcoin holders defend BTC, but bear floor sits 20% lower: Glassnode
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