Bitcoin dropped by over $500 in a matter of minutes this morning, but the reason was actually fairly predictable

Often price movements in bitcoin are explainable.

We see hundred point rallies and drops on seemingly no news and mostly out of nowhere.

However, there are times when large moves actually have some meat behind them, which was the case with the drop we saw early this morning.

For those of you that went to bed seeing bitcoin trading north of $12k, things felt pretty good.

(Source: https://bittrex.com/Market/Index?MarketName=USD-BTC)

They stopped feeling good though when you woke up to eat your breakfast and saw bitcoin trading down around $11,500.

A $500 point drop in a matter of minutes.

So, what happened?

It's pretty simple really.

We saw something that has happened very frequently with bitcoin ever since the CME Bitcoin Futures product went live.

It simply was filling the gap:

(Source: https://twitter.com/crypto_blok/status/1292774149845262337/photo/1)

The CME Bitcoin Futures gap.

There was a gap on the CME Bitcoin Futures chart from about $11,600 to about $11,800.

These gaps happen because the Futures product closes each week while bitcoin continues to trade 24/7. This means that if bitcoin moves significantly in either direction from the time the futures product closed, a gap appears on the chart.

Then when the futures product opens, the price of bitcoin is pushed hard to fill the gaps on the chart.

Why do these matter?

They matter because they have a very high tendency to fill.

I don't have the data in front of me but I remember reading that something like 90% of all CME Bitcoin Futures gaps have been filled thus far.

Which means, any time you see one, there is a pretty decent chance it fills in the not too distant future.

Interestingly enough, the last major one close to where we are trading currently is quite a bit lower:

(Source: https://twitter.com/B1TWIZ/status/1292881389650550784/photo/1)

The closest significant gap is down around $9,700.

Which means bitcoin would need to a drop down to $9,700 in order to fill that gap.

In all honesty I don't think that gap will be filled for a very long time, if ever.

Not all gaps fill and that is one that may not.

If it does though, it's probably a great spot to setup a buy order.

Stay informed my friends.

-Doc

Posted Using LeoFinance