You probably heard about #CME gap filling but have no clue what it is and why it is so important for #Bitcoin or the whole crypto market, Here is a thread to explain 🧵 👇
⭐⭐Repost will be appreciated ⭐⭐
⭐𝗨𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 𝘁𝗵𝗲 𝗖𝗠𝗘 𝗚𝗮𝗽 𝗶𝗻 𝗕𝗶𝘁𝗰𝗼𝗶𝗻 𝗧𝗿𝗮𝗱𝗶𝗻𝗴
Imagine you're watching your favorite show, and it goes off the air for a weekend, but when it comes back, the episode starts with a completely different scene than where it left off. That's kind of what happens with Bitcoin's price on the Chicago Mercantile Exchange (CME) when it creates what's known as a "CME gap."
⭐𝗪𝗵𝗮𝘁 𝗶𝘀 𝗮 𝗖𝗠𝗘 𝗚𝗮𝗽?
A CME gap in Bitcoin's chart occurs because while Bitcoin trades 24/7 on most platforms, the CME, where Bitcoin futures are traded, has specific trading hours and is closed on weekends. Here's how it works:
Friday Close: Let's say Bitcoin's price on CME closes at $30,000 on a Friday.
Weekend Movement: Over the weekend, Bitcoin might jump to $33,000 due to news or market sentiment, but this isn't reflected on the CME because it's closed.
Monday Open: When CME opens on Monday, Bitcoin doesn't start trading at $30,000 where it left off. Instead, it begins at $33,000, creating a gap on the price chart between $30,000 and $33,000.
⭐𝗪𝗵𝘆 𝗗𝗼 𝗧𝗵𝗲𝘀𝗲 𝗚𝗮𝗽𝘀 𝗠𝗮𝘁𝘁𝗲𝗿?
Price Reversion: Often, traders watch these gaps because there's a tendency for Bitcoin's price to move back to fill this gap, meaning it might drop back to $30,000 or close to it before continuing its trend. This happens because traders might see the gap as an overreaction or an opportunity.
Trading Strategy: If you're trading, you might bet on Bitcoin moving back to fill this gap. For instance, if you believe Bitcoin will drop back to $30,000, you could sell at $33,000, aiming to buy back cheaper at $30,000, making a profit from the price difference.
Market Sentiment:These gaps can also reflect significant changes in market sentiment or big news over the weekend that wasn't priced in earlier.
𝗘𝘅𝗮𝗺𝗽𝗹𝗲 𝗶𝗻 𝗦𝗶𝗺𝗽𝗹𝗲 𝗧𝗲𝗿𝗺𝘀:
Think of it like a game of catch-up. If you and your friend are playing a game where you have to match numbers, but you can only play on weekdays, and over the weekend, your friend moves the number from 30 to 33 without you, when you come back on Monday, you'd start at 33. But, because you both usually like to match numbers, there's a good chance you'll go back to 30 before moving forward again. That's your CME gap – a space in the game where the numbers didn't match up due to a break in play.
In Bitcoin's world, these gaps are like little mysteries or opportunities for traders, watching and waiting for #Bitcoin to catch up or move on, providing insights into where the price might go next based on past behavior and market dynamics.
