CME Gaps Point to a Potential Bitcoin Rally – Unraveling Crypto Recovery Prospects

Key Points

• Bitcoin (BTC) may reverse its 19% monthly losses due to a hike in buying activity.
• The CME gap could indicate an upcoming surge for Bitcoin.

Bitcoin’s [BTC] recent dip into the $70,000-zone was short-lived, with the cryptocurrency rebounding and gaining by 7.12% within 24 hours.

A detailed analysis of key metrics suggests that the asset could potentially reverse its 19% monthly losses, particularly if the buying sentiment continues to grow.

CME Gap and Bitcoin’s Potential Surge

The CME gap, which acts as a liquidity point in the market, is formed due to the price difference between the market’s opening and closing. The CME doesn’t trade on weekends or holidays, which often leads to these gaps.

When a gap forms, the price usually trades back to that level.

Bitcoin’s recent 28.57% decline into a CME gap between 80,670 and 77,930 could be a repeat of its 2020 pattern. Back then, after reaching a high above $12,000, it experienced a sharp 22.43% drop to fill the CME gap below, before setting a new all-time high.

These gaps can act as demand and supply levels. In this case, it’s a demand level.

A rebound from this level could lead Bitcoin to trade close to the short-term target of 92,755, where another CME gap lies, and a long-term target surpassing the previous all-time high recorded on the CME chart at $110,150.

Signals of a Bullish Market

There has been an increase in addresses holding Bitcoin over time. Currently, the number of short-term holders is declining, while long-term holders are increasing.

This suggests that long-term holders are growing in number, reducing market supply and impulsive trade movements. As of now, holder addresses have increased to 39.26 million.

The Unspent Transaction Output (UTXO) shows a bullish sentiment among transactions that have occurred within the last 24 hours and between a day to one week.

If this trend continues, it would imply that market participants are acquiring Bitcoin for long-term holding, rather than immediate sell-offs.

Derivative traders also share this bullish sentiment, especially with Bitcoin’s Open Interest subtly increasing by 2.80% to $50.91 billion in the last 24 hours.

The long-to-short ratio, which measures buying volume (above 1) and selling volume (below 1) in the derivatives market, recorded a reading of 1.0072. If this ratio crosses further above this level, it would indicate increased buying activity, suggesting that Bitcoin is likely to trade higher.