Bitcoin: The CME Futures Barometer

July 1, 2019 / by Bill Noble

CME Bitcoin (BTC) futures, with its 20 percent price swings, are starting to remind us of the way agricultural futures moved back in the 1980s.

Back then, the huge hedge funds would pile into highly illiquid instruments creating huge price gaps. The first gap would be a “breakaway gap.” Breakaway gaps usually signal the start of a mega trend. If our read is right, the breakaway gap in CME Bitcoin (BTC) futures came in at $8,500 (Figure 1).  Those gaps usually do not get filled.

 class= Figure 1

The second gap usually gets filled because the emotion of the buying that unfolds when the megatrend becomes obvious can temporarily subside. In this case, the second gap on the Bitcoin (BTC) futures chart is near $10,000. The level is not only the location of a gap but also a prior high from May of 2018. 

Bottom Line: If we read this right, $10,500 should be good support for Bitcoin (BTC). Buyers should come in and a small base might form around that level. If $10,000 holds, the rally should resume.

If the gap at $8,500 does get filled, it would make our analytical construct a little messy. But, it would likely be a golden buying opportunity. 

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