Correction indicators are showing that Ethereum was among the best-performing mainstream assets to invest in but now it could suffer between 50 and 70% drop as we are about to read in the Ethereum news.
Ethereum has been outperforming most of the crypto market and those who invested doubled their money by putting it into the smart-contract focused altcoin. However, now it could be the time to pay attention as the correction indicators show that the asset could suffer a 50-70% drop. The Bollinger Bands are a technical analysis tool that is used to find support, gauge volatility and resistance, and to also act as a buy or sell signal. The versatile tool is among the most popular tool among crypto analysts and it was created by traditional market wiz John Bollinger. He, however, watches the cryptocurrencies and shares commentary about Bitcoin and how it reacts with the indicator.
Bollinger warns of “head fakes” or calls out when is time to pay attention. Bollinger is not calling out the critical moments here but that’s because he rarely comments on Ethereum.
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Bollinger Bands are used all over the world of finance and not only in crypto. But, because crypto assets are volatile, this volatility measuring tool comes in handy. When the tool squeezes, it means volatility is slow and will soon explode but when bands widen, it means volatility is high.
About 90% of the price action took place within the bands so when the assets close outside the bands, either a reversal is coming or a strong continuation is likely. When Ethereum first got closed outside of the Bollinger bands on the rally, the volume helped carry the altcoin higher for three weeks. The tide recently started to turn on the cryptocurrencies as the dollar started rebounding. This caused Ethereum to fall and is now supporter by the upper Bollinger Band. Closing back inside the bands, this means that the rally is over and another downside will follow.
The scenario is one of the downsides for crypto assets that are growing quickly as the correct harder than most other assets which is also why the Bollinger Bands are helpful in crypto technical analysis. In the past, Ethereum closing inside the Bollinger Bands after a strong rally ended up in a 50-70% crash.
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