Key Takeaways

  • The latest drop caused long order liquidations worth $230 million alone for the Bitcoin perpetual contracts on BitMEX.
  • Traders are eyeing an unfilled CME gap at roughly $9,600 which occured back in July.
  • The 200-day moving average is also offering indications of a further descent to ~$9,000.

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Bitcoin led the broader cryptocurrency market crash this week, which lost $50 billion in total market capitalization since Wednesday. 

Bitcoin dipped 16% from $11,919 in the last two days to record lows in the four figures at $9,987 on Bitstamp. Ethereum also plunged below $400 as traders witnessed a sea of red. 

Bitcoin Crash Reveals Unfilled “CME Gap”

The latest drop caused long order liquidations worth $230 million alone for the Bitcoin perpetual contracts on BitMEX. As traders begin to see a recovery in prices, $10,000 remains a crucial psychological support level for the cryptocurrency. However, traders are highly anxious about the CME gap at $9,615. 

“Gaps” refer to the difference in the opening price of an asset from the closing price in the previous trading session. They are a common occurrence in traditional markets but were unknown to the 24/7 crypto traders before the launch of the Chicago Mercantile Exchange’s (CME) Bitcoin futures.

A massive $310 gap on the CME futures chart is left unfilled since the break-out during the weekend of Jul. 25 to Jul. 27 when the CME remained closed. The tendency to fill the CME gap is exclusive to cryptocurrency markets, often in the same week. 

While these gaps have historically been filled, Willy Woo, an on-chain analyst, tweeted

“The CME is quite new and certainly was not around in 2016 when we had a similar stage in the macro cycle.” 

One of the other characteristic features of a Bitcoin bull market is price action above the 200-Day Moving Average (MA). Even in the long-term bull cycle between 2016 and 2017, the price of BTC never closed below the 200-Day MA. Currently, the 200-Day MA sits at $9,081. This level is also the support of the long-term trendline. 

XBT/USD Daily Price Chart on Kraken. Source: TradingView 

The lower limit of the symmetrical triangle is around $6,500, which would, in all likelihood, mark a long-term persistence of bears.

Exchange Flows 

According to an update from Phillip Gradwell from Chainalysis, a lot of Bitcoin and Ethereum have been moving onto fiat exchanges since Aug. 31, signaling the readiness to sell. 

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Ethereum’s reversal is more likely due to the trade intensity within the DeFi sector. Moreover, Bitcoin exchange demand is led by the stablecoin Tether (USDT) rather than fiat, which usually points towards re-entry rather than outright exits. 

Furthermore, the negative funding rate on BitMEX seems to be favoring the bulls; the funding rate for shorting XBT perpetual is 0.1554% daily. It is significantly higher for short orders on Litecoin and Bitcoin Cash at 1.2% and 1.5% daily, respectively. This incentivizes the traders to go long to tap the high rates.

As traders eye a bullish reversal at the CME gap or 200-Day MA, front-running at $10,000 is also likely. However, invalidation of the above levels could negate the market’s post-halving bullishness. 

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