Have you ever heard the quaint name “CME-gap”? You certainly have, if you’ve been interested in cryptocurrencies long enough, especially the most popular one, Bitcoin (BTC), as it’s what’s available on the CME (Chicago Mercantile Exchange) in the form of futures contracts. In this article, we explain what the aforementioned gap is, as well as what BTC futures are and how they affect the price of this token.
What are bitcoin futures?
CME Group is a global company that owns two huge exchanges, the one in Chicago and the one in New York. Today we will focus on the one in Chicago, the Chicago Mercantile Exchange, an exchange that offers derivative products such as Bitcoin (BTC) futures.
A futures contract is a binding agreement between two parties, the buyer and the seller. It involves the sale of an asset at a certain price on a predetermined date. Thus, it can be said that futures contracts are an informed bet that the price of an asset will rise or fall at a certain time. Futures contracts allow traders to make money from price fluctuations.
So what is a “CME gap”?
Now that we know what futures contracts are, it is worth saying that it is the CME exchange that allows them to be traded on Bitcoin (BTC). Since cryptocurrencies are a fairly volatile type of asset, not all exchanges offer futures for them. So far, only two have this instrument on offer – CME and ICE. So let’s answer the question on everyone’s mind – what is the “CME-gap” mentioned in the title?
The CME-gap is a term for a specific situation on the CME exchange, during which bitcoin aggressively rises or falls outside of trading hours on the exchange’s futures market. This generates a price gap on the charts that shows up as a blank area with no trades. This gap is usually filled sooner or later. Filling the gap is the return of the price to the empty area.
While the CME gap is often talked about, it’s hard to say definitively whether it has much impact on the price of the BTC token. After all, futures contracts are just sort of “bets” on where the market for this cryptocurrency is going, and the BTC price itself is affected by many more, often very complex, factors.