Bitcoin Coinbase Premium Giving Potential Buy Signal, Quant Says
A quant analyst explains how the latest trend in the Bitcoin Coinbase Premium Index means a buying opportunity for the asset.
The Bitcoin Coinbase Premium Index has plummeted to -0.221%
In the CryptoQuant Quick Start postalAn analyst talks about the latest developments in the Bitcoin Coinbase Premium Index. this”Coinbase Premium Index” refers to an indicator that tracks the percentage difference between BTC prices on Coinbase (USD pair) and Binance (USDT pair).
When the value of this indicator is positive, it means that the cryptocurrency is trading at a higher price on Coinbase than on Binance. This trend means there is higher buying pressure or lower selling pressure in the former compared to the latter.
On the other hand, the indicator being below the zero mark suggests that Binance users are engaging in higher buying volume than Coinbase users as they push BTC to a higher value.
Now, the chart below shows the trend of the Bitcoin Coinbase Premium Index over the past few months:
As can be seen from the figure, the Bitcoin Coinbase Premium Index has recently fallen sharply into negative territory, which means there are sellers on Coinbase.
In addition to the sell-off, Bitcoin price has also seen a rise declinesuggesting that negative premiums may be the source. In fact, the cryptocurrency has been tracking the metric this way all year, with its price moving up and down in response to changes in buying and selling on Coinbase.
The reason behind this relationship may be that Coinbase is a U.S. institutional investorsoccupying an important position in the market this year.
The Coinbase Premium Index now in the red automatically means these giant investors are selling. Considering that Bitcoin’s price has been following this indicator, this would be a bearish sign for the asset.
However, there is another pattern that could mean different outcomes for Bitcoin. As this quantitative indicator highlights in the chart, a rally has occurred whenever the indicator’s value reached -0.2% over the past year.
The explanation behind this pattern could be that new buyers typically emerge around this sell-off level and decide to buy the dip, pushing the indicator and price higher in the process.
The indicator’s current value is -0.221%, so if Bitcoin hasn’t formed a bottom yet, it may be close to one. Of course, this can only happen if institutional investors believe the bull market is still ongoing.
bitcoin price
Bitcoin briefly fell below the $93,000 level yesterday, but appears to have rebounded, with its current price around $94,100.
