 declined by 2 percent in under an hour in a sharp correction on Nov. 2, catching traders off guard.){kind=link}
The price of Bitcoin (BTC) declined by 2 percent in under an hour in a sharp correction on Nov. 2, catching traders off guard. Coincidentally, the Chicago Mercantile Exchange (CME) Bitcoin futures market opened with a new gap, making $13,100 an area of interest for sellers.
Three technical reasons likely fueled the abrupt decline in the price of Bitcoin: CME gap, major resistance and monthly moving averages (MAs).
CME Gaps
The CME Bitcoin futures market closes during the weekend and on holidays. This means that if BTC sees a large price movement during those days, a gap between CME and cryptocurrency exchanges emerges.
While there is no comprehensive theory as to why traders move to fill CME futures gaps, historically, most CME Bitcoin gaps have filled.
Monthly Moving Averages
On the monthly chart of Bitcoin, the next short-term moving average is the 5-day moving average at $12,203. Throughout history, even during bull markets, at least one short-term moving average on the monthly chart was hit before the continuation of a rally.
Bitcoin has rallied quickly since early October, rising by more than 25% from $11.775 to $13,500. The pace of the uptrend meant BTC was not able to establish clear support levels on higher time frame charts.
Bitcoin Major Resistance
Bitcoin tested the $14,000 resistance level on Oct. 31 for the first time since December 2017. After such a major rally and a key retest, a sharp pullback was expected.