CME Gap and Profit-Taking Hazardous for Bitcoin Bulls

Bitcoin's latest rally faces stiff resistance in short-term profit-taking and a new CME gap.

CME Gap and Profit-Taking Hazardous for Bitcoin Bulls

Key Takeaways

  • A CME futures gap presents a risk to traders attempting to buy a breakout above $20,000.
  • On-chain data from Santiment suggest whales expect further BTC appreciation.
  • A technical failure above $20,000 could provoke a strong pullback towards $17,000.

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Bitcoin’s outlook remains positive in the near-term, as dip-buyers continue to support the bellwether cryptocurrency. This support continues following the bullish news that global investment firm Guggenheim is set to invest $500 million into BTC.

The news appears to have overridden recent fears that U.S. regulators are drafting a new law on self-hosted crypto wallets. However, downside risks remain due to a notable price gap on the CME futures chart over the weekend.

Bitcoin Facing Downside Risk Despite Breaking All-Time High

Furthermore, sentiment metrics show that traders are in a state of “extreme greed,” with the Crypto Fear and Greed index now trading at its joint highest-ever level.  

Crypto Fear and Greed Index
Crypto Fear and Greed Index by

On-chain data analysis from Santiment shows that social volume towards BTC is still relatively low, suggesting that a market top is not yet close. 

When social volume spikes to historically high levels, it has marked important tops, and subsequently, a price reversal has followed.

Bitcoin Social Volume
Social Volume by Santiment

Technical indicators across various time frames are also close to overbought conditions, making the current run towards the $20,000 level even more troublesome for breakout traders.

The short-term trend is vulnerable to retracement, given the almost one-way push higher from $17,000 to $19,800 since the weekend.

Looking more closely at Bitcoin’s near-term outlook, failure to hold above the $20,000 level could lead to another sharp retracement. 

BTC CME Chart by TradingView

The daily time frame highlights that BTC could fall into a lower price range between the $18,500 and $17,200 levels if the price fails again at the $20,000 barrier. 

A bullish inverted head and shoulders pattern on the four-hour time frame is also a warning of a potential corrective drop towards the $17,000 region. The pattern still needs to form a final right-hand shoulder to complete the pattern’s structure before the next major push higher. 

Traders should also be aware that exchange flow balance data from crypto behavioral platform Santiment has revealed a spike of new inflows. The metric suggests that whales have been accumulating as short-term speculators liquidated their positions near the local top.                              

Bitcoin Exchange Flow Balance
Exchange Flow Balance By Santiment

While BTC is expected to trade above the $20,000 benchmark level in the coming weeks and months, an initial lack of buying power above this level on the first few attempts could provoke a chorus of profit-taking amongst short-term HODLers.

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