Bitcoin has been moving in just one direction since 21 July, that’s up. The rally, which appears literally vertical on the 1-day chart, has been relentless. Bitcoin is up by 26.15 percent over the past 10 days and the asset went on to register its new yearly high at $11,700 over the past few hours.
However, with every Bitcoin rally, the common question that arises is what will cause Bitcoin to drop now after witnessing such a rapid rise. On Twitter, the following narrative is starting to gain traction.
What will happen in the next 2 days?#Bitcoin to $13,000 or fill the CME gap at $9,600??
— The Moon 🌙 (@TheMoonCarl) July 31, 2020
What is this Bitcoin CME Gap?
Now, between 24th July and 27th July, Bitcoin’s valuation on CME futures skipped a range when the prices started trading at $9915 on 27th July, from $9600 on the 24th of July. Now this CME gap is nothing but the exchange closing down on the weekends for trading. As an asset, Bitcoin is traded 24×7 on other spot exchanges but on CME futures, the exchange is non-operational on Saturday and Sunday.
Hence, the trading on CME would begin on the spot prices evident on Monday morning and not on the valuation it ended on during Friday evening. Hence, from time to time these gaps take place and according to certain traders and analysts, Bitcoin’s movement over time tends to fill on these gaps. In order to under the paradigm better, we analyze some of the CME gaps since 2018.
CME Gaps; How has Bitcoin responded?
As illustrated in the above, Bitcoin CME gaps over the past 2 and a half years have occurred only a few times. Even though CME closes trading on every weekend, it is definitely not a regular occurrence.
Now after analysis, It can be observed that certain gaps have been filled by Bitcoin’s movement over the years. The gap formed on May 7th, 2019 was filled during the rally in April this year.
Whereas, a minor gap was formed on 14th August 2019 and it was recently filled by Bitcoin recently between 29th and 30th July. As mentioned earlier, a certain group of traders was varying about the gap left at $9600 on 24th July, and they believed that there is a chance Bitcoin may fill this gap up over the next few days.
So Bitcoin filling CME gap; is it 100% accurate?
Frankly, no there is no confirmation to whether Bitcoin absolutely fills these gaps whenever they take place. Coincidently, the asset has been filling them lately but that doesn’t mean it happens every time. For example, there is still a gap that formed during early 2018(check chart) at $3700, that hasn’t bee filled over the past years.
If Bitcoin did fill all the CME gaps, the asset should take care of this one as well but it is unlikely to happen. For Bitcoin’s spot prices to nose-dived till $3700, something major has to go wrong with the digital asset industry.
Hence, a correction down to $9600 is definitely possible, but it will not be because of the CME gap left behind, hence do not bet on it.