Will Bitcoin recover upon futures close?
Throughout the past three months, the CME Bitcoin futures market closed on Jan. 31, Dec. 27, and Nov. 29. On all three days, the Bitcoin price rebounded before and after the close of CME’s monthly contract.
Coincidentally, every time the monthly BTC futures contract of CME closed in the last several months, the cryptocurrency market recovered.
The possible cause of the recovery could be the pressure relieved by the CME market on the bitcoin price.
On days with high trading activity, the CME BTC futures market settles about $500 million in daily volume, accounting for a large portion of the volume of the cryptocurrency market.
Why does BTC price tend to increase upon CME close?
Whether the CME close leads the bitcoin price to go up or merely causes heightened volatility in the cryptocurrency market remains unclear.
Before the close, traders typically try to reach gaps in the bitcoin price and the CME price. As the Bitcoin price dropped to the mid-$8,000 region, it closed a CME gap that has been present for well over a month at around $8,550.
As said by technical analyst Jacob Canfield, CME gaps tend to be filled 99 percent of the time, and while some gaps get filled faster than others, most gaps eventually get filled the majority of the time.
When major gaps are closed, it provides more stability in the market and a more clear direction for the price trend of bitcoin.
But, Mati Greenspan, the founder of Quantum Economics, said that he is not convinced gaps are filled intentionally by traders. He noted that the volatile price action of bitcoin could simply be filling the gaps on CME’s bitcoin chart as time passes.
“Not sure that CME gaps are a real threat to bitcoin’s price discovery process. Prices go up and down and tend to repeat themselves over time. That’s why most gaps end up getting covered because markets aren’t unidirectional.”
Already, ahead of the CME close, the Bitcoin price has started to show signs of a short-term recovery. The price of BTC dropped to as low as $8,450, before rebounding to $8,650.
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