Cryptocurrency News

Bull trap fears surround the bitcoin market as BTC narrows the CME gap to $40K. paints down


Chicago Mercantile Exchange futures opened Monday, June 14 with a gap of $1,575, the first time since May 17, a run-up towards $40,000 in the bitcoin market risked exhaustion.

In retrospect, bitcoin’s recent bearish downside risk increased near the $40,000 level. Furthermore, the said CME gap formed between Friday’s close of $37,325 and Monday’s open of $38,900, raising the possibility that the next correction would push bitcoin bids down to at least $37,325.

This is due to a common psychological belief among traders that BTC/USD reversed its trend To fill the bitcoin futures gap more than 90% of the time. So, for example, traders partially filled the gap that appeared 11 days later during the weekend session of April 17-18.

Similarly, in May 2020, the missing weekend candle between $8,795 and $10,010 was filled shortly after its formation.

Purple lines show filled CME bitcoin futures gaps, black shows unfilled gaps. Source: TradingView

But throughout 2020 and entering 2021, the bitcoin market’s supersonic uptrend left many missing price candles unfinished. Such large gaps appeared during the long Christmas weekend last year, roughly $2,900-long, between $23,745 and $26,650, which remains unfinished to date. Similarly, another incomplete CME gap between $18,020 and $19,155 occurred in early December 2020.

Traders take a maximum of three months to fill the CME gap – the missing price candle in focus appeared in June 2019 and was filled in September 2019.

It took three months for bitcoin futures traders to fill the July 2019 CME gap. Source: TradingView.com

fundamentals

Macroeconomic fundamentals played a huge role in keeping bitcoin price away from its lower CME gap between June and September 2019. At first, many investors bought bitcoin as their haven asset. US-China trade war Weighted on global growth and market sentiment.

Second, Facebook’s entry into the cryptocurrency space with the launch of Libra created more opportunities for bitcoin.

In 2020, the Federal Reserve’s open-ended expansion policy acted as a bullish backstop for bitcoin. The US central bank brought down its benchmark lending rates to nearly zero after the March 2020 global market crash.

At the same time, Fedo started buying government bonds and mortgage-backed securities at a rate of $120bn per month. This reduced investor appetite for Treasury yields and the US dollar, and increased the appeal of bitcoin, gold and stocks as alternative safe-haven.

Veteran investors including Stanley Druckenmiller and Paul Tudor Jones announced their performance in the bitcoin markets following the Fed’s expansionary moves. Meanwhile, Tesla, MicroStrategy, Square, Ruffer, CT AS, and other corporate houses also Add bitcoin to your balance sheet, citing inflation fears.

This somewhat prevented traders from filling the CME gaps at $23,745-26,650 and $18,020-19,155 even five months after their formation.

The Twitter-based market analyst, known by his Planet-of-the-Apps pseudonym xCaeser, meanwhile suggested that traders look to $34,000 as a borderline level to determine the next market bias. In a tweet published after the May 19 price crash, XCaeser famous Holding $34,000 as support would increase the potential for bitcoin to rally towards $47,000. she added:

“If $34k break will be looking for $23,300 and eventually CME gap will be filled.”

Bitcoin has broken below $34,000 several times since May 19, but the cryptocurrency rebounded wildly after each of its bearish moves tested the $30,000-$32,000 area as support.

A Bullish Gap Ahead

After reaching around $65,000 in mid-April, bitcoin price declined on profit-taking sentiment while the CME gap remained between $49,215 and $45,295. Missing price candle is incomplete till date.

This put bitcoin in a disputed technical setup, i.e., it could correct lower once bitcoin hits the $40,000-resistance level and fill the $37,325-$38,900 CME gap, or it could close the $45,295-$49,215 CME gap. You can go to a higher level to fill it.

Exchange data obtained from on-chain analytics platform CryptoQuant further showed an ongoing bias-conflict in the bitcoin market. In retrospect, both BTC inflows and outflows from exchanges have decreased in recent sessions. Meanwhile, the number of inbound addresses declined, while outflow addresses fell to one-year lows.

Also, Elon Musco announced that Tesla would restart Bitcoin payment option once “reasonable (~50%) clean energy use by miners has been confirmed.” The billionaire entrepreneur was reacting to the comments of Signia CEO Magda Wirzyca, calling him a market manipulator.

related: Signia CEO Criticizes Elon Musk for Alleged Bitcoin Pump and Dump

“Bitcoin price has made a good move following Musk’s remarks,” said Yuri Mazur, head of data analysis at the CEX.IO broker, adding that it enhances the cryptocurrency’s ability to fill the $45,295-49,215 CME gap. He told Cointelegraph:

“It currently appears that prices are retracing from their highest levels in the past 24 hours, which could ignite a surprising surge if Musk-influenced buyers decide to wake up the market.”

Musk’s tweets were instrumental in driving the bitcoin price down from $43,500 to $30,000 on March 19. His company Tesla still has about $1.3 billion in BTC as a cash option.