Tron (TRX), the blockchain known for its speed and efficiency, has experienced an extraordinary surge, skyrocketing by 77% following a significant Bollinger Band squeeze. The gross gain was 82% ($0.24 to $0.42), but the price was corrected later.
We saw a similar Bollinger Band Squeeze in Bitcoin when it was at $30k price.
This price explosion comes after prolonged price compression, where Bollinger Bands began converging on November 10 and reached their tightest contraction on December 1, signaling the potential for heightened volatility.
The surge has been linked to Tron’s status as an undervalued asset despite being one of the fastest and most efficient layer-1 blockchains.
In the coming few days, Tron is expected to cross $0.5 based on strong momentum, an RSI breakout in weekly charts, and Bollinger Bands expansion.
Understanding Tron’s Undervaluation
Tron is a layer-1 blockchain with a high scalability among L1s at 85 TPS. This might seem smaller than other chains like Solana but when it comes to blockchains with a very large volume of on-chain assets. lower TPS helps the chain become more secure.
The DeFi ecosystem in Tron is currently valued at $13.6 billion (TVL). This is only second to Ethereum’s $72 billion and is greater than Solana’s 9 billion. Tron has a 10% market share in total TVL in DeFi markets.
Adding to its feat, Tron has become a critical player in the stablecoin ecosystem. It currently holds an impressive $60 billion in USDT (Tether), second only to Ethereum, which holds $71 billion. This pivotal position underscores Tron’s role in facilitating stablecoin liquidity and adoption.
The Role of Stablecoins in Market Liquidity
Stablecoins, such as USDT, are crucial in the cryptocurrency ecosystem, acting as a bridge between fiat currencies and digital assets. Their significance lies in:
- Liquidity Provision: Stablecoins enable swift and cost-effective transactions, ensuring liquidity in both centralized and decentralized markets.
- Hedging Against Volatility: They offer a haven during periods of market turbulence, allowing traders to preserve value.
- Ecosystem Growth: Stablecoins support decentralized finance (DeFi), remittances, and payment systems, fostering innovation and adoption.
Tron’s dominance in the stablecoin market further cements its importance in ensuring smooth market operations and liquidity across trading platforms.
What Are Bollinger Bands?
Bollinger Bands is a technical analysis tool used to measure market volatility and identify potential price movements. Developed by John Bollinger, these bands consist of three lines:
- Middle Band: A simple moving average (SMA) of the asset’s price.
- Upper Band: Positioned two standard deviations above the middle band.
- Lower Band: Positioned two standard deviations below the middle band.
The distance between the bands expands and contracts based on price volatility:
- Wide Bands: Indicate high volatility.
- Narrow Bands: Indicate low volatility.
What Is a Bollinger Band Squeeze?
A Bollinger Band squeeze occurs when the bands contract tightly around the price, reflecting a period of low volatility. This pattern often precedes a significant price move, though the direction—upward or downward—is not predetermined. Traders watch for a breakout above or below the bands as a signal of the forthcoming trend.
In Tron’s case, the prolonged convergence of Bollinger Bands since November 10 and the tightest squeeze on December 1 hinted at an imminent price breakout. The subsequent 77% rally validated the bullish momentum triggered by this technical setup.
Brief on How Bollinger Bands Work
- When the bands come close to each other in a low volatility scenario, it shows the likelihood of a sharp movement in prices.
- When the bands lines are far apart and the band is wide, it shows increase in volatility and the end of any existing price trend.
- Prices oscillate between the band lines. If prices keep touching the upper band, it signals an overbought situation and if prices keep touching the lower bands, it shows there is an oversold situation.
- Periods of low volatility (closer bands) are followed by period of higher volatility (far apart bands).
