As Bitcoin’s price continues to plummet, traders are fixated on the ‘runaway gap’ in CME futures below $80K, a critical threshold that could dictate the market’s next move.
The recent sell-off in the price of Bitcoin has traders closely examining charts for clues about where the market may be headed next. One key level under scrutiny is the ‘runaway gap‘ in CME bitcoin futures below $80,000, which formed three months ago.
Bitcoin is a decentralized digital currency created by Satoshi Nakamoto in 2008.
It was designed to be a peer-to-peer system, allowing users to send and receive payments without the need for intermediaries.
The total supply of bitcoin is capped at 21 million, with new coins being generated through a process called mining.
As of 2022, over 18 million bitcoins have been mined, with the remaining 3 million expected to be mined by 2140.
What are CME Gaps?
A gap is a blank space on a price chart between the closing or high price on a specific day and the next opening price, signifying that there was no trading activity at prices in between. When the gap appears in an established trend, it’s called a ‘runaway‘ or continuation gap.
The Runaway Gap in CME Futures
As the Bitcoin rally picked up steam following President Donald Trump‘s Nov. 4 election victory, a runaway gap appeared in the CME futures on the following day. Prices opened the next day at $81,210, significantly above the election-day high of $77,930.
Will the Gap be Filled?
‘Historically, CME gaps are filled eventually,’ said Nicolai Sondergaard, a research analyst at Nansen. ‘The recent unexpected events are the larger reasons for why we have seen these big downwards movements and without them I think we wouldn’t really be looking at the CME gap.’
However, technical analysis theory suggests otherwise. It says that common gaps, which often occur during regular trading, and exhaustion gaps, which appear during trend reversals, are typically filled quickly. In contrast, the likelihood of runaway gaps being filled is relatively low.
Uncertainty Remains
It’s worth noting that a gap has formed between Feb. 24 and Feb. 25 as prices dropped out of the prolonged consolidation. Which of these gaps will be filled first remains uncertain. The risk indicators at Nansen have recently ‘gone risk-off,’ so it wouldn’t be surprising if the CME gap is filled, Sondergaard said.
