This week, Bitcoin (BTC) has seen a notable decline of 10%, plunging to $86,300 after a sustained trading period that ranged between $90,000 and $110,000. This bearish range breakdown has led traders to carefully examine market charts, seeking insight into potential future price movements.
A primary focus is the “runaway gap” identified in CME Bitcoin futures below the $80,000 mark, which was established three months ago. Gaps, often seen on price charts, signify areas devoid of trading activity due to abrupt changes in price between the close of one trading session and the opening of the next.
Unlike Bitcoin’s spot market, which operates continuously at all hours, CME Bitcoin futures are active for 23 hours each day from Sunday through Friday. The trading session begins at 5 p.m. CT (23:00 UTC) and pauses for an hour at 4 p.m. the following day for maintenance.
The emergence of the runaway gap can be traced back to a significant rally in Bitcoin following President Donald Trump’s election victory on November 4. The CME futures opened the next day at $81,210—substantially higher than the election-day peak of $77,930.
It’s a widely accepted belief in trading circles that price gaps tend to be filled as market participants engage in buying and selling activities within those previously non-traded price ranges. This behavior is seen as reflective of a natural market correction towards equilibrium.
Nicolai Sondergaard, a research analyst at Nansen, commented in a Telegram message, “Historically, CME gaps are filled eventually, and it is usually hard to say when. The recent unexpected events are the larger reasons for why we have seen these significant downward movements, and without them, I believe we wouldn’t be looking at the CME gap so intently.” Additionally, Nansen’s risk indicators have recently shifted to a “risk-off” stance, implying that the closing of the CME gap could soon occur.
However, the principles of technical analysis suggest a more cautious outlook. Common gaps, which arise during regular trading periods, and exhaustion gaps, which point to trend reversals, are often filled rapidly. In contrast, runaway gaps—much like the one currently under consideration—have a lower probability of being filled in the short term.
Amidst this market volatility, a new gap has emerged between February 24 and 25, coinciding with Bitcoin’s recent price drop from its extended consolidation phase. The question remains: which of these gaps will be addressed first?
In conclusion, as Bitcoin navigates through this fluctuating market landscape, traders should keep a vigilant eye on these gap formations and market indicators. Staying informed and analyzing potential price movements in this current environment is crucial for making well-informed trading decisions.
