Bitcoin’s ( BTC) price gained 6.5% on Sept. 9, jumping as high as $58,153 . The bullish reaction followed a weekly close above $54,000, which allowed BTC to maintain a position above its 50-week EMA levels.

Meanwhile, bullish traders are hopeful that the impending Fed rate cuts and historically favourable market conditions in Q4 will result in a sustained rally. However, a potential retest down to $54,000 might be on the cards before the psychological level at $60,000 can be overcome. 

Bitcoin CME gap forms at $54K

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

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

CME gap analysis has become a popular way to evaluate potential retest areas for Bitcoin during a momentum breakout. When these gaps are formed, traders often mark them as potential support and resistance ranges before trend continuation or reversal. 

At the moment, a BTC CME gap between $54,000 and $54,450 has been formed, which is a 6% drop from the current price. 

Why Bitcoin will likely retrace to $54K before the big breakout image 0

Bitcoin CME gap on the 4-hour chart. Source: Trading View

During Q3, Bitcoin formed a total of 10 CME gaps, each filled during active hours. But while some gaps are filled within a few days, others can take a few weeks. 

On July 12, a CME gap between $57,800 and $60,900 was not filled until the Bitcoin correction in August. Therefore, the probability of these gaps getting filled sooner or later is high. 

Why Bitcoin will likely retrace to $54K before the big breakout image 1

Bitcoin CME futures chart. Source: TradingView

It is important to note that it is not necessary to fill CME gaps repeatedly. As highlighted above, BTC may continue rising before returning to fill the aforementioned gap. However, DanCrypto, an independent trader, notes that

“As always, these don't have to get filled, but in a ranging environment, they often do.”

When analysing liquidation heat maps, key levels are around $54,250, $53440, and $52,300. These levels coincide with the above CME gap and the lower bound of the multi-month range, a confluence which increases the possibility of a retest. 

Why Bitcoin will likely retrace to $54K before the big breakout image 2

Bitcoin liquidation heatmap chart. Source: Coinglass

As Cointelegraph reported , the $45,000 level appears to be serving as the “floor” for the current bull market cycle.

BTC price might tag $58K resistance again

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

Why Bitcoin will likely retrace to $54K before the big breakout image 3

Bitcoin 4-hour chart. Source: TradingView

Therefore, BTC price could see a few more attempts at $57,830 and $58,500 before a potential breakdown sometime in the next week or two.

In otherwords, a drop down to the demand zone at $53,500-$54,400—the CME gap—could pan out next week before Bitcoin undergoes a breakout rally from the current multi-month range.

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