Bitcoin price bounced to the tune of 5% following yesterday’s Federal Reserve meeting. The move is now almost complete. What’s interesting about the situation, is that traders at one particular platform could have seen this coming a lot more clearly, while others might have suffered a fake out.
Let’s take a look at the differences between BTCUSD spot market price charts and BTC CME Futures. This highlights this strange divergence. This article also provides some insight into how you might take advantage of these situations.
Why You Can’t Ever Sleep On Crypto Markets
Crypto market doesn’t sleep. The crypto market trades 24 hours a day, 7 days a week. Even stock market futures take a break for short periods. But when it comes to CME Group’s BTC futures contracts, it more closely follows the stock market’s trading hours.
CME is on a short break between Friday and Sunday night. If Bitcoin price moves substantially during the time the trading desk is offline, it will leave a gap on its chart that regularly becomes a target that gets “filled” in the following days.
Similar Reading: Bitcoin Indicator hits a historic low not seen since 2015| Bitcoin Indicator Hits Historical Low Not Seen Since 2015
Some technical indicators might show slight deviations because certain days of spot trading are not included in the CME BTC Futures Chart. Minor discrepancies can be early warning signs of a fake-out.
You need to see the proof. In the chart below, we’ve compared the BTCUSD spot price index, BTC CME futures, and SPX futures. Bitcoin’s spot index produced a bullish crossover of the LMACD yesterday, while the CME chart remained bearish. The CME chart closely resembles the US stock market index.
Source: BTCUSD on TradingView.com| Source: BTCUSD on TradingView.com
How to Potentially Predict Bitcoin Fakeouts by Comparing Spot and CME
The LMACD – the logarithmic version of the Moving Average Convergence Divergence indicator – is considered a lagging indicator. Bullish and bearish crossovers can be used to determine whether or not to close a particular position.
It isn’t clear if the discrepancy above happened naturally due to the missing trading days from the chart, or if something else was at play. This crossover seems to be a bull trap that cleared out last-minute longs. The daily momentum is bearish once again. There is a risk that it will continue to fall until it rises again.
Similar Reading: Time Vs. Price: Why this Bitcoin Correction was The Most Tough Yet| Time Vs Price: Why This Bitcoin Correction Was The Most Painful Yet
Traders need not ditch the indicator altogether, but instead can use such discrepancies between the two indicator’s performance to try and predict when fake outs, stop runs, or other nasty moves will occur.
It was exactly November 2021 that the LMACD generated a false signal for spot exchanges and not the CME BTC chart. This latest fake-out could be a signal that the bottom has reached or simply a hint of further downside.
Source: BTCUSD on TradingView.com| Source: BTCUSD on TradingView.com
Bullish Bitcoin investors must maintain momentum on a daily basis and then follow up with sufficient strength to forcibly follow higher time frames.
Follow @TonySpilotroBTC on Twitter or join Telegram from TonyTradesBTCGet daily market insight and expert technical analysis education. Please note: Content is educational and should not be considered investment advice.
Featured Image from iStockPhoto. Charts from TradingView.com