Bull trap fears engulf the Bitcoin market as BTC draws the CME gap below $ 40,000

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A surge to $ 40,000 in the Bitcoin market threatened exhaustion when the Chicago Mercantile Exchange futures opened with a gap of $ 1,575 on Monday, June 14, the first since May 17.

Looking back, downside risks have increased due to Bitcoin’s recent bearish setbacks near the $ 40,000 mark. Additionally, the said CME gap formed between the closing price of $ 37,325 on Friday and the opening price of $ 38,900 on Monday, increasing the possibility that the next correction would cause Bitcoin bids to drop to at least $ 37,325.

This is due to a common psychological notion among traders that BTC / USD is reversing its trends to fill Bitcoin futures gaps more than 90% of the time. For example, dealers partially filled a void that surfaced eleven days later during the weekend meeting from April 17th to 18th.

Likewise, in May 2020, the missing weekend candle was filled between $ 8,795 and $ 10,010 immediately after it was formed.

Purple lines show filled CME Bitcoin Futures gaps, black lines show the unfilled gaps. Source: TradingView

But over the course of 2020 and 2021, the supersonic upward trend of the Bitcoin market left many missing price candles unfilled. The last of these large loopholes occurred during the long Christmas weekend last year, about $ 2,900 long, between $ 23,745 and $ 26,650, which has not been filled to this day. Similarly, another unfilled CME gap between $ 18,020 and $ 19,155 goes back to early December 2020.

The maximum time it took traders to fill a CME void is three months – the missing price candle in focus appeared in June 2019 and was filled in September 2019.

Bitcoin futures traders took three months to fill the CME void in July 2019. Source: TradingView.com

Basics

Macro fundamentals played a big role between June and September 2019 in keeping Bitcoin prices out of its lower CME gaps. First, many investors bought Bitcoin as their port as the US-China trade war weighed on global growth and market sentiment.

Second, Facebook’s foray into the cryptocurrency sector with the introduction of Libra created more upside opportunities for Bitcoin.

In 2020, the Federal Reserve’s perpetual expansionary policy served as a bullish backstop for Bitcoin. The US Federal Reserve cut its key interest rate to almost zero after the global market crash in March 2020.

At the same time, the Fed began buying government bonds and mortgage-backed securities for $ 120 billion a month. That has quenched investors’ appetites for government bond and US dollar yields, and made Bitcoin, gold and stocks more attractive as alternative safe havens.

Experienced investors, including Stanley Druckermiller and Paul Tudor Jones, announced their exposure to the Bitcoin markets after the Fed’s expansionary moves. Meanwhile, Tesla, MicroStrategy, Square, Ruffer, Seetee AS and other companies have added Bitcoin to their balance sheets, citing fears of inflation.

This put a little bit of a deterrent for traders from filling the 23,745-26,650 and 18,020-19,155 CME gaps even five months after they were formed.

Meanwhile, the Twitter-based market analyst, known by his Planet-of-the-Apes pseudonym xCaeser, suggested that traders should view $ 34,000 as the threshold level for determining the next market distortion. In a tweet released after the May 19 price crash, XCaeser said noticed that holding $ 34,000 as support would increase Bitcoin’s potential to rebound towards $ 47,000. He added:

“When $ 34,000 breaks, it searches for $ 23,300 and eventually fills the CME void.”

Bitcoin fell below $ 34,000 multiple times after May 19, but the cryptocurrency rallied wildly after testing the $ 30,000 to $ 32,000 range as support after each of its bearish moves.

A bullish gap ahead

After Bitcoin prices hit nearly $ 65,000 in mid-April, they fell due to profit-taking, leaving a CME gap between $ 49,215 and $ 45,295. The missing price candle is still unfilled today.

That put Bitcoin in a contradicting technical setup, meaning Bitcoin could either correct downward after approaching the resistance level of $ 40,000 and close the CME gap of $ 37,325 to $ 38,900, or it could move up further to close the CME gap Fill from $ 45,295 to $ 49,215.

Exchange data retrieved from the on-chain analytics platform CryptoQuant also revealed a building bias conflict in the Bitcoin market. Looking back, both BTC inflow and BTC outflow from the exchanges have declined over the past few sessions. Meanwhile, the number of inflow addresses decreased, while the outflow addresses sank to an annual low.

In addition, Elon Musk announced that Tesla will resume the Bitcoin payment option as soon as “adequate (~ 50%) clean energy use by miners is confirmed”. The billionaire entrepreneur reacted to statements by Sygnia CEO Magda Wierzycka, who described him as a market manipulator.

Related: Sygnia CEO Criticizes Elon Musk for Alleged Bitcoin Pump and Dump

“Bitcoin prices have maintained good growth, according to Musk’s comment,” said Yuriy Mazur, head of data analytics at CEX.IO Broker, adding that this increases the potential of the cryptocurrency to bridge the CME gap of $ 45,295 to $ 49,215 shut down. He told Cointelegraph:

“Currently, it appears that prices are pulling back from their highest levels in the last 24 hours. A surprise spike could be triggered if Musk-influenced buyers decide to wake the market up.”

Musk’s tweets were instrumental in causing Bitcoin prices to plummet from $ 43,500 to $ 30,000 on March 19. His company, Tesla, still holds about $ 1.3 billion in BTC as a cash alternative.