An aggressive week of selling has seen the price Bitcoin (BTC) fall below $10,000 for the first time since late-July, triggering fear in the markets.
After posting a local top of roughly $12,500 on August 17, BTC consolidated between $11,250 and $12,100. However, the last three days have seen sellers reject $12,000 and take over the market. Roughly four hours ago, Bitcoin briefly changed hands for $9,990 after seven weeks of price action above $10,000.
BTC/USDT on Binance, 1-hour chart : TradingView
Despite buyers quickly pushing prices back into five-figures, many traders are anticipating that prices will drop further to tag the most recent ‘CME gap’ at $9,700.
The fabled ‘CME gap’ occurs when the markets make an aggressive move outside of the trading hours that the Chicago Mercantile Exchange’s Bitcoin futures markets are trading, resulting in a price gap on the charts — with the most recent gap appearing after Bitcoin’s sudden spike above $10,000 in mid-August.
CME’s BTC futures, 4-hour chart : TradingView
The gap is then ‘filled’ if the charts retrace to retest the price area that is missing from the CME’s chart, fuelling predictions that the markets are destined to retest the $9,700 zone.
However, not all are convinced that the CME gap is behind the latest crypto crash, with some analysts attributing the dip to high correlation between Bitcoin and the legacy markets — with the tech sector having led a 4% crash in the S&P 500 earlier today:
i hate how correlated crypto is to stonks these days
that’s one of the reasons why i left stonks in the first place! https://t.co/uXmBCoyxTt
— 찌 G 跻 じ ⚡️ 🔑 (@DegenSpartan) September 4, 2020
Others speculate that Ethereum’s (ETH) eye watering gas fees have popped the DeFi bubble, resulting in the retracement. BTC and ETH have both fallen 20% over roughly three days. The Crypto Fear and Greed Index is currently at 40 (Fear), a sharp drop down from yesterday’s figure of 79 (Extreme Greed).