Starting from January 2025, the value of Bitcoin (BTC) has been fluctuating greatly, going up and down. The most recent drop occurred on January 13, causing BTC’s price to reach $89,600, which has led investors to ponder if a drop in CME Bitcoin futures could fill the gap below $80,000.
During the period spanning November 9th to November 10th, there was a rise of 3.8% in the futures price from $77,900 to $80,900. Given the patterns typical of CME gaps, some traders speculate that Bitcoin might soon adjust to these prices, potentially closing or “filling” the gap.
Why traders focus on CME gaps
As a financial analyst, I’ve noticed an intriguing distinction between traditional candlestick gaps in asset charts and the BTC CME gap. In conventional finance, a gap arises when an asset’s closing price at the end of one trading session differs from its opening price in the next. However, the BTC CME gap stands out due to Bitcoin’s continuous trading cycle across both decentralized and centralized exchanges. This unique characteristic means that when the CME reopens on Sunday evening, BTC futures must factor in Bitcoin’s spot price fluctuations that transpired over the weekend.
The difference could grow larger due to the unique characteristics of financial derivatives, which are primarily based on predictions about future price fluctuations rather than current market factors affecting immediate transactions. Consequently, Bitcoin futures traded on CME tend to be more expensive than the spot price of Bitcoin when the market is generally optimistic (in a state called contango), and they can be cheaper during periods of pessimism (backwardation).
CME gaps (gaps in the Chicago Mercantile Exchange) are typically filled in over time when the market adjusts following an initial exaggerated response. However, some gaps may persist during powerful market trends, like Bitcoin’s surge in March 2023. This is because many traders expect these gaps to close, which can lead to a self-fulfilling prophecy.
Will the CME gap be filled soon?
If the CME gap were to be filled, BTC could potentially drop to $77,900.
For JJ, the head of crypto derivatives at the trading firm HighStrike, this scenario looks likely.
“Considering BTC’s lack of momentum to begin 2025 we should consider the CME gap resting down below $78K as a primary area of interest on any deep pullbacks in Q1. At present there’s no shortage of macro fears that could cause such a sharp sell-off, such as the 10-year bond yield breaking out above the crucial 4.7% area it had traded under since April of 2024 when BTC was in the low 60k region.”
Regarding additional factors that could catalyze Bitcoin price downside, JJ said,
“Should the market continue to price in more restrictive Fed policy following this week’s CPI report on Wednesday, Thursday’s retail sales data, and ultimately the FOMC meeting on the 29th we are unlikely to see Bitcoin continue to hold on to the $90K – $100K range it’s spent most of the past 2 months consolidating at. A loss of the $90K level into February should set the stage for the CME gap to be filled by the end of Q1.”
In simple terms, @heavynodes, a fellow crypto trader, supplemented JJ’s viewpoint by presenting a Bitcoin UTXO realized price distribution chart. This chart, known as URPD, suggests potential reinforcement for future retests of the current range because there’s been little on-chain volume transacted at that level, indicating less activity or interest in that specific price zone.
Presently, the trading value of the spot price is 9% higher than the short-term average purchase price, implying that the market is still within the usual span of a bull market. But if the market doesn’t recover its upward trend, there’s an increased risk of falling below $88,000. Such a situation might cause short-term anxiety or even mass selling. If this were to happen, Bitcoin’s price could drop to approximately $74,500, as suggested by the URPD chart due to a noticeable lack of trading volume between these figures.
In simpler terms, technical analysis seems fitting given the current situation. Nathan Batchelor, co-founder of Biyond Trader, acknowledges that the price of Bitcoin futures traded on CME could potentially reach as high as $78,855.
“Bitcoin has been holding above the 50-day SMA on the CME futures despite a number of attempts to break to the downside. Notably, the 100-day SMA sits extremely close to the price gap on the CME futures chart. We feel a downside attack toward the 100-day is possible if the 50-day SMA gives way and ideally starts to curve lower pointing to increasing downside pressure.”
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2025-01-17 00:50