Bitcoin Coinbase Premium Rises, What Does It Mean?
Data shows that the Bitcoin Coinbase premium index has shot up recently. Here’s what this could mean for the price of the cryptocurrency.
Bitcoin 30-day SMA Coinbase Premium Index shows rapid rise
As pointed out by an analyst in a CryptoQuant post, volatility may increase for the coin in the near future. The “Coinbase premium index” is an indicator that measures the difference between the Bitcoin price listed on Coinbase Pro (USD pair) and that listed on Binance (USDT pair).
Since Coinbase is an exchange that is popularly used by investors based in the US (especially large institutions), the premium index can give hints as to how the current buying behavior of US investors differs from that of Binance’s user base (which is more globally oriented).
When the index has a value greater than zero, it means that the price listed on Coinbase is higher than on Binance right now. Such a trend suggests that US investors are putting more buying pressure on the market than global investors at present, as they are willing to pay higher.
On the other hand, the indicator having a negative value implies that US investors are selling more than the global owners at the moment (or alternatively, they are only buying to a lesser extent).
Now, here is a chart showing the trend of the 30-day simple moving average (SMA) Bitcoin Coinbase premium index over the past few days:
Looks like the 30-day SMA value of the metric has shot up in the past day | Source: CryptoQuant
As shown in the graph above, the 30-day SMA Bitcoin Coinbase premium had plunged into negative values as the price of the cryptocurrency had seen a sharp decline below $22,000 a few days back. This means that American investors took part in a slightly higher degree of selling around this drawdown.
However, in the days following the price plunge, the indicator’s value remained around slightly positive values, suggesting that US investors bought the drop a bit more heavily than global users.
However, in the last day, the metric has seen a very sharp increase, suggesting that the price listed on Coinbase is noticeably higher than that on Binance at the moment. It seems that US owners have increased their buying today, probably because they believe that the rally is not over yet and see the current decline as a great buying opportunity.
In the past, there have been some price increases driven by buying from US investors, so it is possible that Bitcoin could see a rise in the coming days from this strongly positive premium index.
However, another possibility that should not be discounted is that this sharp rise could just as well be a sign that global investors have started to sell more instead, which, if true, could lead to further downside for the asset.
BTC price
At the time of writing, Bitcoin is trading around $21,600, down 5% in the last week.
BTC has seen decline during the past few days | Source: BTCUSD on TradingView
Featured image from André François McKenzie at Unsplash.com, Charts from TradingView.com, CryptoQuant.com
