Bitcoin’s Potential Retracement to $54K Before Major Breakout

In recent trading activity, Bitcoin futures have consistently filled CME gaps, with a new gap appearing around the $54,000 mark over the weekend.

Market Overview

On September 9, Bitcoin experienced a notable increase of 6.5%, reaching a peak of $58,153. This surge followed a weekly close above $54,000, enabling BTC to stay above its 50-week exponential moving average (EMA).

Many traders are optimistic that anticipated Federal Reserve rate cuts and historically strong market conditions in the fourth quarter may lead to a sustained rally. However, there are signs that a retest of the $54,000 level may be necessary before overcoming the critical $60,000 psychological barrier.

Understanding Bitcoin CME Gaps at $54,000

Bitcoin futures trading on the Chicago Mercantile Exchange (CME) creates gaps when there is a discrepancy between closing and opening prices from one trading day to the next. Unlike cryptocurrency markets, the CME closes on weekends, leading to these gaps.

Traders increasingly rely on CME gap analysis to identify potential retest areas during momentum breakouts. These gaps are often viewed as significant potential support and resistance levels, guiding traders’ decisions on market trends.

Currently, a gap exists around $54,000 to $54,450, representing a 6% drop from Bitcoin’s present price.

Throughout the third quarter, Bitcoin generated ten CME gaps, with all having been filled during trading sessions. While some gaps are filled shortly after formation, others may take weeks to fill.

For instance, a CME gap between $57,800 and $60,900 was not filled until the subsequent correction in August. This suggests a high probability that gaps will eventually be addressed.

It’s important to note that not all CME gaps require a fill. BTC may continue to appreciate before revisiting the mentioned gap. According to trader DanCrypto,

“As always, these don’t have to get filled, but in a ranging environment, they often do.”

Analysis of liquidation heat maps indicates critical levels around $54,250, $53,440, and $52,300, aligning with the CME gap and forming a potential retest area.

Recent observations suggest that the $45,000 mark may be acting as a “floor” in the current bullish cycle.

Potential Resistance at $58,000

While BTC has surpassed the 50-day EMA, it encounters resistance at the 100-day EMA and may also face challenges at the 200-day EMA.

Consequently, Bitcoin’s price may attempt to reach $57,830 and $58,500 before potentially experiencing a decline in the coming week or two.

A pullback to the demand zone situated between $53,500 and $54,400 — corresponding to the CME gap — could occur before Bitcoin embarks on a breakout rally from its ongoing multimonth range.

Please note that this content does not constitute financial advice. All investment and trading activities carry risks, and individuals should conduct their own research before making decisions.