Bitcoin CME Futures’ price action plays a key role in predicting spot prices for BTC

  • 04 July 2019, Thursday, 12:30

Bitcoin was built as a tool that would provide respite from fiat, but it is also being used as a speculative asset for trading. Institutions like CME, CBOE, Grayscale, etc have developed products based on Bitcoin’s price movements for investors who do not want to risk it.

Bitcoin CME Futures has been gaining a lot of traction and is being used as a tool to help traders understand the correlation between Bitcoin spot prices and futures markets. Unlike traditional stock markets, Bitcoin and other cryptocurrencies are available to trade 7 days a week throughout the year; however, the same is not the case for Bitcoin CME Futures, it is available to trade five days a week, i.e., it starts at 5 PM Central Time on Sunday (UTC-5) and closes at 4 PM Central Time on Friday.

Due to the above, there are gaps created in the price charts of BTC, as seen above, which is related to the spot prices. Joe McCann, a trader, stated the reason why these gaps are filled by the spot prices,

“In general, the price needs to resolve all areas of potential price discovery available to buyers and sellers in order to evaluate the true value of the asset. What does this mean? Well, in many cases a gap up gets “faded” (sold off) until the gap is filled and then rallies higher. In legacy markets, “Specialists” (human beings) used to do this intentionally, thus manipulating the price for their own benefit. Over a long enough time horizon, gaps all eventually get filled.”

The gaps formed in the past are being filled; the gap formed on June 23 was filled by the price on July 2, similarly, the gap formed on June 29 and 30 was filled July 4. The next available gap extends from $9,500 to $8,500, seen on June 15, assuming, all the gaps will be filled, the price of Bitcoin might see it fill this gap in the near future.

At press time, the price of Bitcoin successfully closed above the 0.5 fib level [$11,394] and was trading at $11,725. The next immediate resistance would be at $12,378 and above that would be the 0.618 fib level [$13,346], however, it doesn’t look like there is enough bullish momentum for the price to push higher.