Why Bitcoin investors should be worried about this particular ‘gap’?

Utkarsh Gupta

After a consolidating period that lasted 3 weeks, Bitcoin finally breached above its $64,000 resistance. At the moment, the digital asset is valued at $65,950. The market rejoiced over its bullish move but the worst might not be over for Bitcoin. Its positive breakout took over the weekend, and it led to the creation of a CME gap. In this article, we will analyze the importance of a CME gap, and how it may affect BTC’s value going forward.

What is a Bitcoin CME gap?

A Bitcoin CME gap is the difference between the trading price of a CME Bitcoin futures contract when the market opens on Sunday, and when it closes on Friday. Bitcoin spot prices are traded on a 24×7 window while CME futures have a limited trading period. A similar situation occurred over the past 24-hours.

Bitcoin breached above the $64,000 resistance when the CME market was closed but spot prices increased in the charts.

Source: Trading View

As illustrated in the charts, a CME gap is currently present between $61,605 and $62905, which is roughly $1300. Now, the question is why does it matter?

According to statistics, due to institutional trading, 77% of these CME gaps are often filled in the market. This means the market covers the spread in the charts. A CME gap was created on 26th October as well, which was filled immediately the following day. Yet, similar to every market condition, CME gaps are also not completely accurate. A CME gap currently exists between $31,500 and $34,300 which was created on 25th July 2021, and it is yet to be filled.

Why is it important to track the CME gap right now?

Source: Skew

CME Bitcoin futures has attracted a lot of market activity recently. The first Bitcoin ETF, ProShares also buys their futures contracts on CME, and presently the Open-Interest on CME is $4 billion. It means $4 billion worth of Bitcoin contracts is currently trading on the exchange.

Hence, it increases the likelihood of BTC dropping down to $61600 at least yet again. It is important to note that Bitcoin could record a new all-time high before the gap is filled, as these gaps remained unfilled for months. However, traders who may have missed the $60,000 re-test, could wait till $61,600 for re-entry at a lower valuation.