Controversial Bitcoin indicator signals possible price correction

  • The massive price increase of Bitcoin (BTC) has led to the creation of a new gap between USD 8,800 and USD 9,800 on the CME Bitcoin Futures chart over the weekend. 
  • Technical analysts see the CME Futures gap as an indicator that the Bitcoin price will consolidate to USD 8,800. 

After the massive price increase on Friday, the Bitcoin price moved in the range of 9,200 to 9,900 US dollars yesterday, October 28th. The volatility thus remains high. However, the trading volume has declined. At the time of writing, Bitcoin was trading at approximately 9,400 USD.

However, Bitcoin (BTC) recorded another gap on the Bitcoin futures chart of the Chicago Mercantile Exchange (CME), which could indicate a possible decline. While the Bitcoin price rose rapidly, the Bitcoin CME futures chart has created a very large gap between USD 8,800 and USD 9,800. In Bitcoin’s recent history, these gaps have almost always been filled.

They occur when Bitcoin’s price changes significantly during market closing times in the traditional CME financial market. Once the market is reopened, the difference between the closing price and the opening price becomes a “gap”. Since the CME only offers its cash settled Bitcoin futures during regular business hours during the week, some “CME Bitcoin Future Gaps” have arisen since December 2017.

In the technical analysis, the occurrence of a “gap” acts as a meaningful indicator of price movements. A gap between market close and opening indicates sudden news of changes in the fundamentals of an asset. In the case of Bitcoin, the pump that triggers the gap is attributed to the news from China.

An indicator for the Bitcoin price?

The CME Bitcoin Futures gaps have attracted the attention of Bitcoin investors in recent months as they have often become important price targets for BTC. As the CME Futures chart shows, Bitcoin has had a significant gap between USD 8,800 and USD 9,800 since last weekend. The 8, 800 USD level also corresponds to the resistance from the previous range, which could now serve as support, depending on whether these levels hold.

As a result, some technical analysts, such as The Cryptomist, expect the Bitcoin price to fall and close the gap before there will be another bullish move.

In retrospect, the 200-day moving average on the chart served as a support and marked the bottom of the market. The zone between USD 9700 and USD 10,000 is a large resistance zone that is likely to last for several days, as is already becoming apparent.

As Richard Heart showed via Twitter, historically almost all the gaps that have arisen on the CME since the day of Bitcoin’s all-time high at 20,000 USD have been filled. The Bitcoin price drop of 15 percent in September, for example, also filled an open gap that stretched back to mid-June 2019.

Interestingly, in addition to the current gap, another gap is still open that could signal a bullish impulse. This took place from 9 to 12 August between 11,795 and 11,695 US dollars. Even if gaps are not always closed in time or not at all, this gap of USD 100 could indicate that Bitcoin could possibly return over USD 11,700 to balance the CME order book.

Which gap is filled first or whether the Bitcoin Futures gap is really a reliable price indicator remains to be examined critically. After all, Bitcoin, like no other asset, is unpredictable.

About Author

Jake Simmons has been a crypto enthusiast since 2016, and since hearing about Bitcoin and blockchain technology, he's been involved with the subject every day. Beyond cryptocurrencies, Jake studied computer science and worked for 2 years for a startup in the blockchain sector. At CNF he is responsible for technical issues. His goal is to make the world aware of cryptocurrencies in a simple and understandable way.

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