Cardano Jumps 20% as Analyst Eyes Bitcoin Pullback to $40K to 'Fill CME Gap'

• Layer 1 tokens ADA, ALGO, AVAX and SOL among best performers as capital rotation from stalling BTC lifts altcoins.
• Bitcoin may revisit $40,000 to "fill CME price gap," crypto analyst Willy Woo speculated.

Native tokens tied to layer 1 (L1) blockchains gained the most Friday, with Cardano [ADA] being the best performer, as steady bitcoin [BTC] price fueled capital rotation to altcoins.

Bitcoin bounced between $43,000 and $44,000 during the day, quickly shaking off a minor dip following a stronger U.S. employment report than analysts expected that dampened interest rate cut expectations for next year.

The top crypto was recently trading at around $43,800, consolidating as investors digested its swift rally to near $45,000 this week after its breakout from $38,000 a week ago.

Altcoins, meanwhile, jumped across the board, resembling early November's "altcoin rotation" when slowing bitcoin momentum drove traders to realize some gains and invest in smaller, riskier cryptocurrencies. These capital rotations are typical in the crypto markets after large bitcoin run-ups, followed by a rally in bigger crypto assets then among meme coins and micro caps as traders chase tokens that haven't moved yet to profit.

ADA surged 25% to 57 cents at one point during the day, its highest price since August 2022. It gave up some of the early gains later in the day, but was still up almost 20% today. Other notable top performers were native tokens of Polkadot [DOT], Algorand [ALGO], Avalanche [AVAX] and Solana [SOL], which posted 7%-11% gains.

The CoinDesk Market Index [CMI], a basket of almost 200 cryptocurrencies, was up 1.5% through the day, more than BTC, underscoring altcoin outperformance.

What's next for BTC

As bitcoin's momentum stalled, some analysts speculated about a potential pullback to retest lower price levels.

Bitcoin-focused analyst Willy Woo eyed a price level between $39,000-$41,000 based on a price gap in the Chicago Mercantile Exchange (CME) bitcoin futures market, which BTC might "fill" sometime in the future.

These price gaps occur because the CME futures market, unlike native crypto exchanges like Binance or Deribit, don't trade around the clock, and there could be a difference between closing and opening prices depending on bitcoin's price action when the market is closed. Some analysts reckon that asset prices tend to revisit these levels during a correction, filling the gap.

BTC rallied last weekend surpassing $40,000, when the CME futures market was closed, creating the price gap on the chart.

"By my count 28 out of 30 gaps have been filled on CME daily candles (93%)," Woo posted on X, formerly Twitter.

However, these gaps do not always get filled. For example, BTC hasn't revisited the CME gap at around $20,000 yet, formed in March during the weekend collapse of Silicon Valley Bank (SVB).

Institutional inflows to bitcoin are "underappreciated"

Despite a potential short-term pullback, bitcoin's outlook is bullish, with growing interest among institutional investors, Hany Rashwan, co-founder and CEO of digital asset management firm 21.co, said in a Friday interview with CoinDesk TV.

Rashwan opined that market observers are "underappreciating" future inflows into BTC if – or once – a spot-based exchange-traded fund gets approved in the U.S, which will likely happen according to analysts.

"There are a lot of [prospective] buyers, who for various reasons wanted to invest in crypto but has been prohibited to do so" because of regulations, he said. Rashwan noted that 75% of inflows into digital asset funds during the year happened in the past 60-90 days. "That's not normal," he said, adding that it's "a sign of change in sentiment across primarily institutional players."

Read more: Crypto Funds Attract Largest Weekly Inflow in 2023 as Bitcoin 'Short-Sellers Capitulate'

Rashwan prognosed all-time high prices for bitcoin, but not in the short term.

"I think we will beat the [bitcoin] all-time highs sometime in the next 12-18 months," he said. "We are not fully out of the woods yet."