Understanding Bitcoin CME Gap: Key Aspects and Impact on Price

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by Giorgi Kostiuk

2 years ago

Made with AI

  1. What is Bitcoin?
  2. What are Bitcoin CME futures?
  3. What is the Bitcoin CME gap?


    4. Trading Bitcoin can follow many strategies. However, it's essential to understand aspects like the Bitcoin CME Gap, which can significantly impact Bitcoin's price.

    What is Bitcoin?

    Bitcoin is the most recognized digital and decentralized cryptocurrency. It is created through solving cryptographic tasks. Transactions are written into a decentralized blockchain, which ensures that Bitcoin is always available and immune to manipulation. The revolutionary aspect of Bitcoin is that it does not need a central authority like a bank for the validation of transactions. The current price of Bitcoin in USD/EUR/YEN (Fiat) is created through supply and demand. Despite the creation of various cryptocurrencies after Bitcoin, it remains the largest cryptocurrency by market capitalization, with a dominance of 41.6%.

    What are Bitcoin CME futures?

    The CME (Chicago Mercantile Exchange) is the world's largest derivatives trading exchange, traditionally offering futures and options on futures on the most diverse assets, including agricultural products, forex, energy, commodities, and stock indexes. A future is a legal agreement to buy or sell a well-defined quantity of something at a determined price at a determined future date. At the height of the 2017 Bitcoin bull run, on October 31st, the CME added Bitcoin to its portfolio of tradeable asset classes. Shortly after, Bitcoin crashed from its all-time high, but the popularity of CME Bitcoin futures continued to grow, with the exchange reaching an all-time high of 268.18K Bitcoins in May 2019.

    What is the Bitcoin CME gap?

    The Bitcoin CME Gap is the difference between the trading price of Bitcoin futures contracts when the market opens on Sunday and when it closes on Friday. Unlike cryptocurrencies, traditional assets do not trade around the clock. Most traditional exchanges follow regular working hours and close on holidays, and the CME is no exception. Bitcoin futures trading on CME opens from Sunday evening until Friday evening (Central Time). From Friday to Sunday, the Bitcoin CME futures price is fixed, while Bitcoin's price continues to move up or down on cryptocurrency spot exchanges. When CME futures reopen, futures contracts catch up with spot prices, creating a gap.

    Bitcoin CME Gaps often tend to fill, meaning that the spot price moves back to the previous close. However, this is not a guarantee, but rather an indicator that should be considered along with others when making trading decisions. Trading strategies are based on probability, not determinism, and the Bitcoin CME Gap is another tool in the trader's arsenal.

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