Bitcoin Coinbase Premium Index Plunges, What Does It Mean?
Data shows that the Bitcoin Coinbase Premium Index has plunged recently, here is what has happened recently during instances of such a trend.
The Bitcoin Coinbase Premium Index has fallen sharply recently
As pointed out by an analyst in a CryptoQuant post, BTC volatility has usually increased in the past when the metric has reached the same levels as now.
“Coinbase Premium Index” is an indicator that measures the percentage difference between the Bitcoin price on Coinbase Pro (USD pair) and that on Binance (USD pair).
Coinbase is a popular crypto exchange among US investors (especially large institutions), while Binance has a more global user base.
This means that the difference between the BTC prices on the two platforms can indicate whether US investors are putting more buying pressure on the market than the global investors or not.
Now, here’s a chart showing the trend of the 30-day simple moving average Bitcoin Coinbase Premium Index over the last couple of weeks:
The 30-day SMA value of the metric seems to have sharply declined in recent days | Source: CryptoQuant
As you can see in the graph above, the 30-day SMA Bitcoin Coinbase Premium Index has dropped recently.
This suggests that right now there is a minimal difference between the price listed on Coinbase and that on Binance.
In the chart, the quant has highlighted previous instances of a similar trend in the indicator over the past couple of weeks.
It seems that every time the Coinbase Premium Index has fallen to low levels comparable to the current one, Bitcoin has observed an increase in volatility shortly after.
If a similar pattern takes hold this time as well, the cryptocurrency could see even more volatility in the short term.
In the past, this type of volatility has taken the price in both directions, so it’s hard to say whether it will have a bullish or bearish effect on the market.
One thing is clear, however, investors in the US are not providing a stronger buying pressure than global owners at the moment.
BTC price
At the time of writing, Bitcoin’s price is hovering around $20.4k, up 4% in the last week. Over the past month, the crypto has increased 5% in value.
The chart below shows the trend in the price of the coin over the last five days.
Looks like the value of the crypto has been trading sideways above the $20k mark during the past few days | Source: BTCUSD on TradingView
Featured image from Viktor Forgacs on Unsplash.com, charts from TradingView.com, CryptoQuant.com
