Bitcoin CME gaps have been a prevalent topic of interest for many investors over the last few years. Why? Because many use them as price indicators to predict future movements.
Back in 2017, Bitcoin reached nearly $20,000 in a parabolic rally, which caught the attention of the world. Not only investors were interested in it, though, as so were other major institutional players in the world of trading.
Approximately at that time, two new Chicago based brokers launched for Bitcoin futures — allowing contracts to be cash-settled against the USD. The first came on behalf of the Chicago Mercantile Exchange (CME) and the second from the Chicago Board Options Exchange (CBOE).
While the discussion has certainly died down a lot over the last few months as they paint a rather grim future, which many deny due to wishful thinking on their investments, it’s important to understand how they work, and why they are used as market indicators.
What are CME Gaps?
A gap is an unfilled space or interval on a chart, caused by sharp movement in either direction. In an upward trend, a gap is produced when the highest price of one candle is lower than the lowest price of the following candle. Conversely, in a downward trend, a gap occurs when the lowest price of any candle is higher than the highest price of the next candle.
CME gaps only open when Bitcoin moves while the CME Bitcoin futures market is closed during after market hours. This is why we commonly see gaps form during the weekends.
A study found that CME gaps have a 95% of being filled. Historically, every gap has eventually been filled over time. There is generally only a few open at a time, and when they are open, it can indicate the next direction of Bitcoin.
Bitcoin CME Gaps can be viewed on the CME Futures Chart (!BTC)
Can Traders Benefit From Bitcoin Price Gaps?
When looking at these gaps, one might conclude that they will be filled quickly within the next few days. Some traders are even relying on this as a strategy to incorporate when analyzing the charts. However, this could be quite a dangerous endeavour, if not executed properly.
Within the traditional market, it could be more transparent. For example, some traders might be buying a stock in the after-hours’ trading if the company releases a positive earnings report, and they expect a price increase. But since Bitcoin doesn’t stop trading on other exchanges, this could be trickier in the cryptocurrency world.
From a technical point, when a significant gap appears, it removes the immediate support or resistance, and the gap is more likely to fill.
Other gaps’ general rules of thumb might include:
- The trade should be in the overall direction of the price on a higher timeframe (at least 4h).
- The price should retrace to the original resistance level. This indicates that the gap is filled, and the price returns to prior resistance turned support.
- The risk management should be symmetrical — 1:1, since almost all gaps close
CME Gaps Currently Open in the Market
As of writing this (July 28), the price has broken resistance and is now moving towards the highest CME gap ($11,700).
Once this gap is filled, we will have a few more gaps to fill in lower ranges. Many traders are speculating about a bull run, although my 2020 sentiment is contrary to this for numerous reasons, one being the unfilled CME gaps.
I believe we will be correcting and filling these gaps before a bull run. People often underestimate Wall Streets control on the markets. If it isn’t already clear, every top/bottom in the last three years has been direct result from futures going live/offline.
If we look at the lowest CME gap, which was formed in 2019 at $3500~, it could mean another big crash in the markets.
CME Gaps — Bitcoin Price Prediction
The most sought after question regarding Bitcoin CME gaps is what exactly do they predict for the future of BTC.
Considering all gaps are now lower than the current price, it signals that Bitcoin will have a large reversal sometime later this year.
There is lots of greed in the markets right now, as we’re ranging around the highest gap. Once filled, we could obviously go slightly higher, although the chances for a reversal are much higher.
In my opinion, there is a 99% we revisit sub $10,000 this year. We will likely go much further. As said earlier, the lowest gap is at $3,500.
I’m sure there will be some future catalyst that we don’t know about yet to produce this drop, although I’ve been accumulating large amounts of shorts for this eventual drop below 2019, and 2020 lows.
At the end of the day, there is no definitive proof that we will drop to these ranges. This is all speculation.
None of my content is financial advice. I simply provide tons of free calls, and insight to my followers, and it’s ultimately the responsibility of each individual to make trades themselves. I hope this insight can be valuable in time, and I appreciate you reading this!
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