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The volatility indicator, which charts the leading cryptocurrency, has reached its lowest level for 21 months in a sign the digital commodity could face an imminent bullish or bearish trend. The news suggests the world’s most well-known cryptocurrency may not be as vulnerable as originally thought. Bitcoin has experienced fluctuating swings in value over the past few months, with lower price highs and lower price lows (pennant) since the end of June. As a consequence of the fluctuations, volatility as represented by Bollinger bands width - an analysis tool derived from +2, -2 standard deviations of a price's moving average - has hit the lowest point since December 2016, Coindesk reports.

Bitcoin could be about to experience huge price swings, a volatility indicator has suggested

The digital asset may not be as vulnerable as predicted

But when measured by standard deviation across all exchanges, volatility is at its lowest level since July 2017, according to Bitcoinity. An extended period of volatility is usually an indicator of strong directional bias, meaning bitcoin could soon witness a vast swing in either a bullish or bearish direction. At present, one bitcoin is worth £4,926 and the digital asset remains stuck in a bearish cloud, which may take a few days to clear. The daily chart shows BTC to be trapped in a pennant pattern, with the top edge (resistance) of the pennant located at £5,236 and the lower edge at £4,760.

A chart shows the price of Bitcoin against the US dollar

Meanwhile, the Bollinger bandwidth has plunged to a 21-month low. A large swing in bitcoin prices is apparently imminent as a result of the reduced volatility. Present resistance sits at £5,238, with some analysts predicting the digital currency to experience an ascent back towards its July high of £6,500. But if the cryptocurrency is unable to handle itself, there may be an increase in volatility which will see the asset take a nosedive towards its June low of nearly £4,300.

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