Bitcoin (BTC) Analysis: Despite Recent Surge, CME Gaps Could Spell Blood
Over the past few days, the price of BTC/USD surged past the significant $10,000 resistance level, only to be knocked back at $11,300 despite several attempts to push further.
Bitcoin is now building support around the $11,000 mark, with many questioning whether it will ever trade below $10,000 again. However, with two significant CME gaps remaining open below $10k, those who missed out might still get a chance to buy Bitcoin at budget prices.
Why CME Gaps Matter
Following the introduction of Bitcoin Futures in late 2017 by the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE), the threat of CME and CBOE gaps became a hot topic in the crypto world. A gap occurs when the price of an asset moves too quickly in one direction, causing the lowest (or highest) price of a single candle to be higher (or lower) than the highest (or lowest) price of the previous one.
The phenomenon occurs with Bitcoin Futures because CME and CBOE markets close over the weekend, while Bitcoin continues to trade on crypto exchanges, creating the possibility for large price discrepancies. Due to the extremely high level of investment in Bitcoin Futures, these gaps cause something of a ‘vacuum’ in the market, putting intense pressure on the price to fill the void.
Historically, almost every single CME and CBOE gap has eventually been filled so they are not something to take lightly. Currently, a significant CME gap exists around $9,600 and another at $3,500 that is unlikely to get filled. Since the current price is close, the $9,600 gap has an extremely high probability of getting filled, as indicated in this chart from TradingView trader SwingPyro.
However, this is by no way a sure thing and there is no time limit on gaps such as these being filled. We could just as likely break $20,000 before these gaps are filled and witness the gaps filled at some point in the distant future.
With sentiment and upside momentum still strong, BTC/USD could still push as high as $13,800 in the coming days if fresh capital arrives. However, resistance at $11,300 is proving strong, and already support at $11,000 is waning. A loss of the $11k level would result in a downward spiral that could dip below $10,000 in early August.
Below $10,800, more support on the way down exists at $10,500 and $10,300 but with a lack of prior consolidation, this support is weak. Furthermore, the RSI on the BTC/USD daily chart is dropping and with Bitcoin already in overbought territory, the asset will need some serious buying pressure to maintain the uptrend.