Over the weekend, the bears seem to be dominant as Bitcoin (BTC) slipped beneath the $10,000 support area. In two futile attempts, it experienced a strong rejection near the $10,500 area. As a result, bitcoin price wobbled against the US Dollar to enter a bearish zone, breaking key supports near $10,200 and $10,000, plunging further towards the $9,600 support.
BTC’s decline in the past two days was met with a mixed reaction in the market, first, that of apprehension that probably its bullish trend might be over while others maintained positivity that the BTC correction may lead to a fresh rally.
Analysts have over time used the price of short term BTC derivatives as indicators to monitor its future price trends. At this point, a blockchain analyst cum trader, Coiner-Yadox is looking at a scenario that BTC may rebound to the range of $10k by Tuesday using the “CME Gap”.
Coiner-Yadox isn’t the first to use a “CME gap” to predict BTC price trends, Michael van de Poppe, a Dutch analyst predicted with a measure of accuracy, Bitcoin’s fall below $8,650 in January using the “CME gap’.
The Logic Behind the “CME Void”
On open days, the CME bitcoin futures market liquidates a sum of $300 to $500million in daily volumes. This could be deduced from the BitMEX funding rate when the funding rate is positive, longs pay shorts. When it is negative, shorts pay longs. The leverage factor used in BitMEX and other margin trading platforms makes the real volume documented less representative. At the weekend, when BTC had a shortfall by hundreds of dollars, a significant amount of long contracts were liquidated.
Over the weekend the BTC dwindled by more than 7%, it coincided with the close of the CME market, taking into consideration that CME is regarded to be a chunky part of the daily trading volume of the worldwide bitcoin market.
Traders have traced this to be the cause of increasing market volatility during weekends in the crypto space.
Earlier on today, Bitcoin price climbed from beneath $9,800 to over $9,900 when the CME bitcoin market resumed and the void created filled.
Given that the CME bitcoin futures market closed at over $10,000 before the weekend, there is a likelihood that the opening of the CME market could lead to short settlements and set off a strong short nip to fill the space.
Also, Monday is widely known to be the day in which the crypto market hits a higher level of volatility than any other day of the week, it could act as a catalyst to buoy the uptrend of BTC.
Image Credit: Shutterstock