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3 reasons Bitcoin fell 2% in just 1 hour

November 2, 2020

Bitcoin (BTC) price fell 2% in less than an hour. Catch traders off guard. CoincidentallyThe CME Bitcoin futures market opened with a new void, making the $ 13,100 an area of ​​interest for sellers.

Three technical reasons that likely caused Bitcoin prices to drop sharply: the CME gap, the highest resistance, and the monthly moving averages (MAs).

There are now four loopholes in Bitcoin CME futures

The CME Bitcoin futures market closes on weekends and holidays. This means that when BTC sees a big movement in price these days, a gap will be created between CME and crypto exchanges.

3 reasons Bitcoin fell 2% in just 1 hour
3 reasons Bitcoin fell 2% in just 1 hour

While there is no comprehensive theory as to why traders are trying to fill the gaps in CME futures, In the past, most of the CME gaps were closed by Bitcoin.

Since October Bitcoin has rallied strongly. During the weekend, the BTC volume tends to decrease as the market becomes less active. But In the past few months, BTC has risen continuously with no drop in volume.

As a result This resulted in the formation of four CME gaps in a row. Every weekly candle in the past month has created a new CME gap, which is rare for Bitcoin. This means that even on the weekends, CME has progressed so quickly that new consecutive gaps have formed.

Bitcoin CME gaps in the price list. Source: Zack Voell, TradingView.com

The gaps are at $ 13,100, $ 12,970, $ 11,505, and $ 11,100. These areas could be considered interesting for sellers. Random, The range of $ 12,970 to $ 13,100 is an important area for moving averages.

The next short-term monthly Bitcoin average is below $ 12,500

On the monthly chart for Bitcoin, the next short-term moving average is the 5-day moving average at $ 12,203. Throughout history Even during bull markets, there was at least one short-term moving average on the monthly chart before a rally continued.

Bitcoin has rallied rapidly since early October, rising more than 25% from $ 11,775 to $ 13,500. The pace of the uptrend meant that BTC was unable to set clear support levels on the higher timeframe charts.

For the past two months, Bitcoin has repeated the rally pattern, followed by a brief period of consolidation. This created significant support and resistance levels on the daily chart, making the rally sustainable compared to previous ones.

Bitcoin’s monthly price chart. Source: TradingView.com

But still, On the weekly and monthly charts, Bitcoin is still far from the notable short-term moving averages. The next average is the 5-day average of around $ 12,200.

BTC is breaking out of a large level of resistance

Bitcoin tested the $ 14,000 resistance level on October 31 for the first time since December 2017. After such an important rally and a new key test, a major setback was expected.

Some traders said they were surprised by the intensity of the bitcoin price drop when it occurred. However, when they saw the high level of open interest in the futures market, traders said the move made more sense.

“”Every now and then a movement surprises me “, said a pseudonymous dealer named CL. Later, CL added that the open interest was high enough to warrant such a move. “Actually forget it, I miss reading how much open interest has risen beforehand, that makes sense.”

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