With news on the market running thin following Fed Powell’s hint at decreasing interest rates in the near future, markets are in a wait-and-see phase. While markets trade sideways as investors look to allocate capital, Bitcoin and the crypto market are potentially flashing signals that could lead to significant effects following September.
Why CME gaps are so significant in Bitcoin trading
CME gaps are price gaps that form during the weekends. Bitcoin is trading in the $110,000 range, a slight decrease from its recorded all-time high of $124,457. Traders and investors have signalled that a gap at $116,910 has emerged during periods when CME closed. Since crypto is 24/7 and traditional markets close, market activity affects Bitcoin, creating a CME gap.
As it stands, there is currently an unfilled gap of $4,300 that needs to be filled by the respective Monday or in the following weeks. Historically, identified CME gaps act as indicators for strong price movements, with approximately 98% of weekend CME gaps being filled. While timeframes are not always accurate, this statistical reliability has proven to be key to institutional Bitcoin trading.
Institutional trading behavior and elevated funding rates
Recent market trends reveal an increase in funding rates across major exchanges, signaling growing institutional interest in Bitcoin. While there are outflows due to short-term uncertainties, the Wall Street consensus is positive as rate cuts create better instances for risk-on assets to be held by institutions.
Funding rates, which represent the cost of holding leverage positions, typically tend to spike during periods of significant market momentum. As such, with positive outlooks on the market, institutional traders are not selling and are more open to paying premiums on funding rates as they see a higher upside potential.
With that, existing funding rate patterns suggest institutional capital is sustaining long positions, pointing to underlying bullish sentiment despite the recent price correction. While the price correction is small in comparison to other periods, for hedge funds or institutions, these can provide serious damage. Still, with the current situation, institutional backing provides crucial support for potential gap-filling scenarios, as these players possess the liquidity and market influence necessary to drive significant price movements.
CME futures open interest data helps complete the story. While open interests have dropped significantly from over 212,000 BTC to roughly 130,000 BTC in 2025, profits generated from spot-futures price differences have remained subdued with annualized returns below 10%
Federal Reserve becomes a catalyst for crypto liquidity
The Federal Reserve’s monetary policy decisions carry significant weight for crypto and traditional investors. While some might see such events as the rate cut to be priced in, with minimal effects once they go into effect. Still, prediction markets are showing a 91.7% probability of a September rate cut, which could shape how investors look at risk and reassess their portfolios.
Historical trends suggest that crypto markets tend to respond positively to Federal Reserve rate cuts. For example, when the Fed reduced interest rates from 5.5% to 4.5% between September and December last year, crypto markets surged by 57% over the same period. Additionally, the potential re-election of Trump shouldn’t be overlooked, as his lenient stance on cryptocurrency previously helped push Bitcoin to record highs. However, it’s important to note that correlation does not imply causation. Lower interest rates, by reducing the opportunity cost of holding riskier assets like Bitcoin, may help explain this connection.
A potential rate cut in September could breathe new life into the basis trade. However, investors might interpret this move as a signal that the current economic cycle is approaching its end, with rate reductions already factored into market expectations. As cash yields decline, institutional investors often pivot to strategies with higher return potential, which could drive up futures premiums and boost trading activity.
CME gap paving the way for market recovery
Multiple factors align to support potential Bitcoin recovery toward the $116,910 CME gap level. The historical gap-filling patterns, institutional positioning, ongoing ETF inflows, and easing of the monetary policy all create a compelling case for market traders. However, all of it can be dismissed if rate cuts are already priced in and the CME gap takes longer than usual to fill.
Monthly closes often bring increased volatility and institutional rebalancing activities. If Bitcoin continues to sustain its momentum towards the gap level in the new month, it would not only fill the technical objective but also reiterate market strength after weeks of consolidation.
Maximizing returns through strategic portfolio positioning
Bitcoin’s CME gap represents more than just technical analysis and insights; it also illustrates how institutional influence continues to grow in the cryptocurrency markets. As Bitcoin becomes increasingly correlated with traditional risk assets, understanding these dynamics becomes crucial for any investor.
For investors seeking exposure to cryptocurrency or looking to diversify their assets, Yieldfund provides ways to access the cryptocurrency market without having to monitor or actively trade the market. As a quantitative trading company, Yieldfund offers fixed interest over three separate investment plans, reducing the impact of Bitcoin’s volatility on your portfolio while still earning up to 60% yearly in returns.
