A quant has explained how the latest trend in the Coinbase Premium bitcoin index could imply a buying opportunity for the asset.
Coinbase bitcoin Premium Index has plummeted to -0.221%
In a quick shot from CryptoQuant <a target="_blank" href="https://cryptoquant.com/insights/quicktake/6769e61a12a32e1b22501d40-btc-Coinbase-Premium-at-0221-Suggesting-a-Potential-Buy-Signal” target=”_blank”>mailan analyst spoke about the latest development in the Coinbase Premium bitcoin index. “Coinbase Premium Index” refers to a metric that tracks the percentage difference between the price of btc on Coinbase (USD pair) and that on Binance (USDT pair).
When the value of this metric is positive, it means that the cryptocurrency is trading at a higher rate on Coinbase than on Binance. Such a trend implies that there is higher buying pressure or lower selling pressure on the former compared to the latter.
On the other hand, the indicator below the zero mark suggests that Binance users are engaging in a greater amount of buying than Coinbase users as they have driven btc to a higher value there.
Now, here is a chart showing the trend in the Coinbase Premium bitcoin Index over the past few months:
<img src="https://technicalterrence.com/wp-content/uploads/2024/12/Bitcoin-Coinbase-Premium-Provides-Potential-Buy-Signal-Says-Quant.png" alt="bitcoin Premium Index Coinbase” />
From the chart, you can see that the Coinbase bitcoin Premium Index has seen a sharp drop into the negative region recently, which means that sellers have appeared on Coinbase.
In addition to this selling, the btc price has also seen a drop, which would suggest that the negative premium could be the source of it. In fact, the cryptocurrency has been tracking the indicator this way all year, with its price rising and falling along with buying and selling changes on Coinbase.
The reason behind this relationship potentially lies in the fact that Coinbase is home to US-based institutional investors, who have had a significant presence in the market this year.
The fact that the Coinbase Premium Index is in the red right now would naturally imply that these giant investors are selling. Considering that btc price has followed the metric, this would be a bearish signal for the asset.
However, there is another pattern that could imply a different outcome for bitcoin. As highlighted in the chart, the metric has seen a rebound every time its value reached the -0.2% mark over the past year.
The explanation behind this pattern may be that generally around this sales level new buyers appear and decide to accumulate on the dip, raising the metric and the price in the process.
The current value of the indicator stands at -0.221%, so it is possible that bitcoin is close to bottoming out, if it has not already formed one. Of course, this would only happen if institutional investors think the bull run is still continuing.
btc Price
bitcoin briefly fell below the $93,000 level yesterday, but it appears that the coin has recovered as its price is now trading around $94,100.
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