Why is Bitcoin going back to $54K before the big breakout?

On September 9, Bitcoin gained 6.5%, rising to $58,153. The bullish reaction was a weekly close above $54,000, which allowed BTC to maintain its position above the 50-week moving average (EMA) levels.

Meanwhile, bullish traders are hoping the Fed's rate cuts in the fourth quarter will bring a continued rally in historically favorable market conditions. However, a downward test to $54,000 could be on the cards before breaking the psychological level at $60,000.

The Bitcoin CME gap is established at $54,000

Bitcoin (BTC) futures trading creates so-called gaps when there is a difference between the closing and opening prices of subsequent trading days. These gaps are created on the Chicago Mercantile Exchange because, unlike cryptocurrency markets, the CME is closed on weekends.

Related: Bitcoin speculators repeat 2021 de-risk as exposure drops 21.6K BTC

CME gap analysis has become a popular way for Bitcoin to assess possible areas to test during a sudden crash. When these gaps form, traders mark them as potential support and resistance regions before trend continuation or reversal.

Currently, there is a difference between BTC CME between $54,000 and $54,450, which is a 6% reduction from the current price.

During the third quarter, Bitcoin established a total of 10 CME slots, each filled during active hours. But while some slots are filled in a few days, others may take a few weeks.

The CME gap between $57,800 and $60,900 was not filled until Bitcoin's August correction on July 12. Therefore, these vacancies are more likely to be filled sooner or later.

It is important to note that it is not necessary to fill CME slots frequently. As mentioned above, BTC may continue to rise before returning to fill the aforementioned gap. However, DanCrypto, an independent trader, notices that

“As always, these don't have to be filled, but in different environments, they often do.”

Analyzing liquidity heat maps, key levels are around $54,250, $53,440 and $52,300. These levels are consistent with the CME interval above and the lower bound of the multi-month range, increasing the possibility of a retest of this convergence.

According to Cointelegraph, the $45,000 level seems to be serving as a “floor” for the current bull market cycle.

The price of BTC may be given resistance at $58,000 again.

While BTC has broken above the 50-day EMA level, it is facing resistance from the 100-day EMA and is likely to see resistance from the 200-day EMA.

Therefore, the price of BTC may see a few more tests at $57,830 and $58,500 before a possible crash in the next week or two.

In other words, a drop into the demand zone at $53,500–$54,400 — the CME Gap — could come next week before Bitcoin finds resistance from its current multi-month range.

This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.