A significant future gap on the Chicago Mercantile Exchange (CME) closed Bitcoin (BTC) as the BTC / USD exchange rate suddenly fell below $ 54,000 on February 22nd.
A CME gap arises when the bitcoin price moves up or down after the end of CME on weekends or US holidays.
Unlike most cryptocurrency exchanges, since CME bitcoin futures exchange is not always open, a gap is formed between CME and many bitcoin trading platforms.
Why does CME Bitcoin have a big gap?
The CME gap is sometimes an important gap in overcoming Bitcoin’s rally in the short term.
For example, the last gap formed when the price of bitcoin exceeded $ 58,000 on the major cryptocurrency exchanges, while the bitcoin futures market on the Chicago Mercantile Exchange was closed for two days.
This created a gap of $ 55,504, which closed when the bitcoin price fell after the opening of a new weekly light.
Bitcoin tends to track strongly during the short period after the opening of a new weekly light. This gets rid of overly long positions and gives some balance in the market.
Prior to the opening of the weekly light, the Bitcoin futures market’s financing rate ranged from 0.1% to 0.15%. This is 10 to 15 times the standard funding rate of 0.01%.
Although the level of financing for Bitcoin has remained relatively high throughout the bull cycle, the financing rate of 0.15% indicates that the market is very crowded.
The combination of a higher financing rate for bitcoin futures, the existence of a CME gap and whale deposits on major US stock exchanges is likely to cause this decline.
Large deposits discovered in Gemini
Before withdrawing, CryptoQuant discovered that large BTC deposits had been transferred to Gemini, one of the leading US cryptocurrency exchanges.
When whales put BTC on the stock exchange, it usually indicates an intention to sell. Consequently, it is possible that some whales took profits from their positions, which led to a sharp fall in the market in a short time.
However, whales that sell large amounts of bitcoins may lead to a larger correction than usual, as this will lead to successive liquidations in the futures market.
Several overly long positions can be wound up sequentially, and amplifies the effect of whale sales. The data shows that over 1 billion dollars in futures contracts have been settled in the last 24 hours.
After the autumn, traders expect a gradual improvement. Scott Melker, a cryptocurrency trader and technical analyst, said recent history indicates that the falls are short-lived. He wrote:
“I have no idea what is happening here, but recent history shows that low life is short-lived. I would like to see a slow spike pick up again after this part of the sale. Of course, we can retire, but every such step in the past has been an opportunity to buy. “