Ok guys, on the main chart I have the September futures contract that is due to settle at end of business day TOMORROW.
With that said. What is really important noting is that futures trading has really really REALLY affected prices because imagine what prices do to to any sizable position you take on even just a 5x margin... Practically affects price immediately.
Now imagine trading a few hundred to a few thousand BTC on margin.
For those of you unfamiliar with futures gaps, the way the exchanges that offer them make money is by calling the liquidity that those sizable order create.
So, essentially what people with a ton of money can do tell the exchange that they bet a TON of money that the money they inject into the market will be so sizable that it will fundamentally move the market. THOSE are the gaps.
Whenever you see the market move against that position and fully cover the gap in front of it is when their position is called and essentially the exchange makes off with most, if not all, their money. But if the market does NOT cover their position, they make off like bandits.
So whenever you read about "filling the futures gap", that's what it means. It means that the market has essentially moved against their position and their position was either liquidated or they made a call against them to where they had to close the position to avoid heavy loss. This is how futures markets make money.
As you can see, the only ones remaining in this contract period that have been unfilled are the ones circled in yellow... So ask yourself. Can the market move by a few thousand in literally one day?..
UNLIKELY. What IS likely is the one small tiny little gap left about $70 below our lowest recent low to be filled here and then I predict we go up.
So this bring up the question of where the gaps are in the NEXT contract that is due to expire at the end of next month? Surprise surprise, they're ALL above us! ALL of them.
Guess where I'm betting my money that we're going to revisit sooner than later?
ALSO..
If you ever want to look at future facing contracts as a whole (essentially all of the most recent gaps made), go into your TV ticker search bar and type in "BTC2!" And looking at the most recent ones. Guess where we have a whole ton of gaps?
So I'll ask you where you think price is headed sooner or later?
Once we fill the small gap below us, I predict we go higher.
Comment
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Quick update to the gaps we could potentially hit tomorrow. Seems like the lowest one "feasible" is at $7200. Although I think there is too much support for us to get that low by the end of the day tomorrow. But we shall see.
Looking at next month’s contracts looks favorable for a move up next month, possibly even as early as this weekend or next week to cover the gaps directly above us currently.
insomFX
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You said : For those of you unfamiliar with futures gaps, the way the exchanges that offer them make money is by calling the liquidity that those sizable order create.
Can you elaborate on this please?
insomFX
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IM new to this what do you mean by the gaps? Im lost there. Are those futures 1 week long or something ? Even if so what do the gaps suggest?
Zulu_Kilo
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@insomFX, in short. Those gaps are “liquidity chunks”. They are a specific time and price where a big enough position was taken to move the market up or down.
So here is what futures do. They can create stability in price for customers that have really large holdings, they are also used as a call or put either for or against the price.
So in this scenario, let’s say the futures contract that started in April. A person with 10,000 BTC wants to protect its price. They enter into a futures contract with CME which does end up moving the market either up or down depending on the position they enter.
Essentially what happens is that the CME group covers the price to create stability. But that also moves markets.
Their attempt is to not have to pay the contract holders the positive difference in price. But all the other positions create a cascading effect to where it has to be covered either by liquidating those people OR calling margin on those contracts by the end of that contract’s settlement date.
Whatever positive difference there is between when the position was made and what the call was has to be paid to the holders of those positions by the end of the settlement date, which is end of September for that contract’s period. If the contract holder can’t cover their position, they are liquidated. And that’s how CME makes money. Gobs of it...
All in all, this is how it influences the markets.
insomFX
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@zk8619, You mean Leveraged Contracts right?
a 10k BTC can be hedged (if thats what you meant by protection against price) by shorting it via CME contracts x10 right?
So if the price goes down and the contract is due end of september how does CME make money out of it?
insomFX
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@insomFX, but i think i get how it affects market price as when the person who shorted that amount for hedging liquidates the position by the end of sept its the same as someone longing hence causing demand? (price up) Am i right?
Zulu_Kilo
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@insomFX, As far as how a position affects the market. Always understand this about any leveraged position. If, for example you go into a short position, the exchange places an order equal to the size of the position x leverage at the exact liquidation price ABOVE your position. So what that order does is it creates a huge demand for the market to want to go up...
Because remember, prices ALWAYS go towards demand. When there is a big enough demand up or down, that is where price tends to go.
You remember when we were between 14k and 10k for months? The longs/shorts ratio was something like 3 or 4 longs to 1 short. So what those longs between 10k and 14k all placed orders on the exchange at their liquidation price BELOW where those positions were opened for longs. THAT created more demand for prices to go down because that is where the majority of price demands were.
Zulu_Kilo
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@insomFX, in THAT specific scenario CME doesn't make money out of it and that is why it would be in CME's interest to manipulate the market and cover that position to where they bump prices back up and make money by either liquidating that short or forcing the position to close for a loss.
insomFX
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@zk8619, is there any place we can talk via voip? i have many questions regarding those circles (which are not in sept-oct period) and also the futures outside those circles which dont have gaps also the green rectangle in the second image which you didnt explain?
and on your latest comment you circled lowest gap for this period (which ends tomorrow) as 7.2 but that circle belongs to another period? im lost again :P
sry to ask so many questions i would really wanna learn via voice over if thats a possibility if not thats ok.