Liam Frost · 2 days ago · 2 min read
News › Bitcoin › Technical Analysis
Bitcoin filled a bearish gap on CME futures and now a bullish one awaits to get filled
Disclaimer: This article contains technical analysis, which is a methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. The content presented in this article is the opinion of the author. None of the information you read on CryptoSlate should be taken as investment advice. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own diligence and consult with a financial advisor before making any investment decisions.
The sharp price movements that characterize Bitcoin’s trend have left different price gaps in the Chicago Mercantile Exchange (CME) Group Bitcoin futures contracts. These gaps tend to get filled later on as the price of BTC develops. The recent 15 percent drop that Bitcoin experienced, in fact, filled a price gap that dates back to mid-June. Now, there is an unfilled gap that could be signaling a bullish impulse despite the current market sentiment.
CME Bitcoin futures gaps
Price gaps symbolize imbalances created in the market and, at their most basic form, represent a large mismatch between the number of buy and sell orders that have been filled. These usually occur on speculative assets across a variety of markets when there is high volatility after trading hours are closed.
The CME Group Bitcoin futures contracts are open from Sunday to Friday from 5:00 PM until 4:00 PM Central Time with a daily 60-minute break at 4:00 PM. During the most recent rally that saw Bitcoin rise more than 90 percent in June, several gaps were left behind while CME’s trading hours were closed.
The first one was a $540 gap between $8,515 and $9,055 that occurred from June 14 to June 17. The second one developed from June 21 until June 24, leaving $555 gap between $10,060 and $10,615. Finally, the third one happened during the 60-minute break from June 25 to June 26, representing a $290 gap between $11,525 and $11,815.
Although the latter two price gaps were filled in a timely manner during the end of June, the $540 gap of June 14 took a long time to fill. In fact, after more than three months Bitcoin broke out to the downside of the consolidation period that it entered in June 26 plummeting 15 percent all the way down to $8,160, subsequently filling the gap that it had left behind.
Now that the most bearish gap has been filled, there is still a bullish one that remains open. This one took place from Aug. 9 to Aug. 12 between $11,795 and $11,695. Even though gaps are not always filled in a timely fashion—or filled at all, this $100 gap could indicate that Bitcoin may want to return above $11,700 to rebalance CME’s orders book.
Soravis Srinawakoon, Co-Founder and CEO of Band Protocol said:
“Looking at the technical chart of Bitcoin, we’ve been seeing a squeeze in a descending triangle of the Bitcoin price in the past few days combined with the recent disappointing launch of Bakkt it is clear there is an overall negative macro sentiment in the market. ”
Bitcoin price analysis
At the moment, an upswing to $11,700 seems technically unlikely. As a matter of fact, Bitcoin has broken below the lower support of a descending triangle that formed on its 1-day chart. This is considered a bearish pattern with a 31.5 percent target to the downside (determined by measuring the height from the upper to the lower trendline).
Based on the Fibonacci retracement indicator, if BTC indeed continues depreciating it could find support around the 61.8 or 65 percent Fibonacci retracement area. This is considered by many traders as the “golden” retracement level due to the high probability of a rebound.
From this point, Bitcoin could resume its bullish trend and try to fill the gap between $11,795 and $11,695 that remains open.
Despite the bearishness seen on Bitcoin’s 1-day chart, Su Zhu, CEO at Three Arrows Capital, believes that Bitcoin is bound for an uprise. Zhu claims that the recent price drop could be the “fuel” needed to clear out over-leveraged positions and that allows this cryptocurrency to reach higher highs.
As it was seen before, Bitcoin has a tendency to fill the price gaps left on the CME Group Bitcoin futures contracts chart. Therefore, it is likely that BTC will eventually move up to around $11,700 to clear the imbalances in CME’s orders book. But, the scenario presented by the descending triangle on BTC’s 1-day chart indicates that a further decline may come first. Thus, it will be wiser to wait for this crypto to hit the bearish target given by the descending triangle or regain the 38.2 percent Fibonacci retracement area as support before thinking of a bullish trade.