A major Bitcoin Chicago Mercantile Exchange ( BTC ) Futures spread narrowed as BTC / USD suddenly fell below $ 54,000 on February 22.
A CME spread forms when the Bitcoin price increases or decreases after the close ofCME during weekends or statutory holidays in the United States.
Unlike most cryptocurrency exchanges, because the CME Bitcoin futures exchange is not open at all times, a gap forms between CME and many platforms of Bitcoin trading.
4 hour BTC / USDT price chart (Binance). Source: TradingView.com
Why is the CME Bitcoin divide significant?
The CME divide is sometimes seen as a significant gap for the Bitcoin rally to continue in the short term.
For example, the latest gap was formed when the price of Bitcoin exceeded $ 58,000 on major cryptocurrency exchanges, while CME's Bitcoin futures market closed for two days.
As such, a spread of $ 55,504 emerged, which tightened as the price of Bitcoin fell sharply after the weekly new candle opened.
Bitcoin tends to correct sharply in a short time after a new weekly candle opens. This eliminates long over-indebtedness and brings a certain balance to the market.
Prior to the weekly candle opening, the Bitcoin futures market funding rate ranged from 0.1% to 0.15%. It 's 10 to 15 times higher than the rate ofe default financing of 0.01%.
While Bitcoin's funding rate has remained relatively high throughout the bull cycle, a funding rate of 0.15% indicates that the market is extremely crowded.
The combination of a high Bitcoin term funding rate, the presence of a CME spread, and whale deposits on major US exchanges likely fueled the decline.
Large deposits spotted on Gemini
Prior to the withdrawal, CryptoQuant found that large BTC deposits had been transferred to Gemini, a major crypto exchange. American currency.
When whales deposit BTC in exchanges, it usually signals an intention to sell. Therefore, it is likely that some whales profited from their positions, causing the market to fall sharply in a short period of time.
However, whales selling large amounts of Bitcoin cant cause a larger correction than usual as this leads to cascading liquidations in the futures market.
Many long over-indebtedness can be liquidated consecutively, amplifying the effect of the whale-induced selling. Data shows over $ 1 billion in futures contracts have been liquidated in the past 24 hours.
After the decline, traders expect a gradual recovery. Scott Melker, cryptocurrency trader and technical analyst, said recent history indicates that declines do not last long. He wrote :