Bull trap fears engulf Bitcoin market as BTC paints CME gap below $40K

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A run-up toward $40,000 successful the Bitcoin (BTC) marketplace risked exhaustion arsenic Chicago Mercantile Exchange’s futures opened connected Monday with a spread of $1,575, the archetypal since May 17.

In retrospect, the downside risks heightened owed to Bitcoin’s caller bearish pullbacks adjacent the $40,000 level. Atop that, the said CME spread formed betwixt Friday’s adjacent of $37,325 and Monday’s unfastened of $38,900, raising possibilities that the adjacent correction would punctual Bitcoin bids to autumn to astatine slightest $37,325.

That is owed to a wide intelligence conception among traders that BTC/USD reverses its trends to capable Bitcoin futures gaps much than 90% of each time. So, for instance, traders partially filled a spread that appeared during the April 17–18 play league 11 days later.

Similarly, successful May 2020, the missing play candle betwixt $8,795 and $10,010 was filled instantly aft its formation.

Purple lines amusement filled CME Bitcoin Futures gaps, achromatic shows the unfilled gaps. Source: TradingView

But passim 2020 and entering 2021, the Bitcoin market’s supersonic uptrend near galore missing terms candles unfilled. The past of specified large gaps appeared during the agelong Christmas play past year, astir $2,900 long, betwixt $23,745 and $26,650, which remains unfilled to this date. Similarly, different unfilled CME spread betwixt $18,020 and $19,155 dates backmost to aboriginal December 2020.

The maximum clip traders person taken to capable a CME spread is 3 months — the missing terms candle successful absorption appeared successful June 2019 and was filled successful September 2019.

It took Bitcoin futures traders 3 months to capable July 2019 CME gap. Source: TradingView

Fundamentals

Macroeconomic fundamentals played a immense relation betwixt June and September 2019 successful keeping Bitcoin prices distant from its little CME gaps. Firstly, galore investors bought Bitcoin arsenic their haven plus arsenic the United States–China commercialized war weighed connected planetary maturation and marketplace sentiment.

Secondly, Facebook’s foray into the cryptocurrency assemblage with the motorboat of Libra created much upside opportunities for Bitcoin. 

In 2020, the Federal Reserve’s open-ended expansionary argumentation served arsenic a bullish backstop for Bitcoin. The U.S. cardinal slope brought its benchmark lending rates to astir zero pursuing the March 2020 planetary marketplace crash.

At the aforesaid time, the Fed started buying authorities bonds and mortgage-backed securities astatine the complaint of $120 cardinal per month. That sapped investors’ appetite for Treasury yields and the U.S. dollar and accrued the entreaty of Bitcoin, gold, and stocks arsenic alternate harmless havens.

Veteran investors, including Stanley Druckenmiller and Paul Tudor Jones, announced their vulnerability successful the Bitcoin markets pursuing the Fed’s expansionary moves. Meanwhile, Tesla, MicroStrategy, Square, Ruffer, Seetee and different firm houses besides added Bitcoin to their equilibrium sheets, citing ostentation fears.

That somewhat kept traders from filling the $23,745–26,650 and $18,020–19,155 CME gaps adjacent 5 months upon their formation.

Twitter-based marketplace analyst, known by his Planet-of-the-Apes pseudonym, xCaeser, meantime suggested traders ticker $34,000 arsenic a borderline level for determining the adjacent marketplace bias. In a tweet published successful the aftermath of the May 19 terms crash, xCaeser noted that holding $34,000 arsenic enactment would summation Bitcoin’s imaginable to rally toward $47,000. He added:

“If $34k breaks volition beryllium looking for $23,300 and yet CME spread fill.”

Bitcoin has breached beneath $34,000 aggregate times aft May 19, but the cryptocurrency bounced backmost wildly aft investigating the $30,000–$32,000 country arsenic its enactment pursuing each of its bearish moves.

A bullish spread ahead

After reaching astir $65,000 successful mid-April, Bitcoin prices declined connected profit-taking sentiment portion leaving a CME spread betwixt $49,215 and $45,295. The missing terms candle stands unfilled to this date.

That enactment Bitcoin successful a conflicted method setup — i.e., either Bitcoin could close little aft approaching the $40,000 absorption level and capable the $37,325–$38,900 CME gap, oregon it could spell proceed heading higher to capable the $45,295–$49,215 CME gap.

Exchange information fetched from on-chain analytics level CryptoQuant further showed a brewing bias-conflict successful the Bitcoin market. In retrospect, some BTC inflow and outflow from exchanges decreased successful caller sessions. Meanwhile, the fig of inflow addresses declined portion the outflow addresses fell to deed a one-year low.

— CryptoQuant.com (@cryptoquant_com) June 14, 2021

Furthermore, Elon Musk announced that Tesla would resume the Bitcoin outgo enactment erstwhile “there’s confirmation of tenable (~50%) cleanable vigor usage by miners.” The billionaire entrepreneur was reacting to Sygnia CEO Magda Wierzycka’s comments calling him a marketplace manipulator.

Related: Sygnia CEO criticizes Elon Musk for alleged Bitcoin pump and dump

“Bitcoin prices person maintained a bully maturation pursuing Musk’s comment,” said Yuriy Mazur, caput of information investigation section astatine CEX.IO Broker, adding that it increases the cryptocurrency’s imaginable to capable the $45,295–49,215 CME gap. He told Cointelegraph:

“It presently appears that prices are retracing from their highest levels successful the past 24 hours, a astonishing uptick whitethorn beryllium ignited should the Musk-influenced buyers determine to awaken the market.”

Musk’s tweets were instrumental successful crashing Bitcoin prices from $43,500 to $30,000 connected March 19. His institution Tesla inactive holds astir $1.3 cardinal successful BTC arsenic a currency alternative. 

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