Why Did Bitcoin Plunge? Here’s what On-Chain Data says
Bitcoin has fallen below the $20,000 level today for the first time in two months. Here’s why this plunge may have occurred, according to data from the chain.
Bitcoin price fell with Coinbase Premium turning negative
As pointed out by an analyst in a CryptoQuant post, the US government’s recent move may have played a role in the recent decline in BTC’s price. There are a couple of relevant indicators here: Coinbase Premium and Spent Output Age Bands (SOAB).
“Coinbase Premium” measures the difference between the Bitcoin price quoted on the cryptocurrency exchange Coinbase and that quoted on Binance. Coinbase is an exchange popularly used by US-based investors (especially large institutions), while Binance has a more globally oriented audience.
Because of this reason, Coinbase Premium can provide hints as to whether US holders are buying (or selling) more or less than global investors right now.
When the value of the calculation is positive, it means that the price quoted on Coinbase is higher than on Binance at the moment, and therefore the US-based users have put on higher buying pressure than the global investors (or alternatively, they have just been selling less).
On the other hand, negative values of the metric suggest that US entrants may be outselling the global user base at the moment.
Now, here’s a chart showing how Bitcoin Coinbase Premium has changed over the past week:
Looks like the value of the metric has gone down in recent days | Source: CryptoQuant
As shown in the graph above, Bitcoin Coinbase Premium has turned negative recently. This means that US investors may have put extraordinary selling pressure on the cryptocurrency during this period.
Interestingly, the price of the coin has fallen while the premium has gone negative, which may indicate that American participants may have had more of a hand in this latest plunge.
The chart also contains data for the other indicator of interest here, “SOAB”, which tells us which age groups (or groups) in the market have moved their coins recently.
Curiously, the 6m-12m age group, which includes all Bitcoin investors who have held their coins for at least 6 months and at most 12 months ago, has shown a big move just a few days ago.
As for the source of these old coins, the quant explains, “the transaction is linked to bitcoins seized by the US government because they are related to Silkroad.”
The timing of this large Bitcoin transaction and the selling pressure increasing on Coinbase is interesting and may suggest that there may be a connection between the two.
“It’s hard to say what impact this transaction had on the price drop because we can’t see what’s happening on the stock exchange,” notes the analyst. “But all indications are that it caused additional selling pressure.”
BTC price
At the time of writing, Bitcoin is trading around $19,800, down 11% in the last week.
BTC has plunged over the past day or so | Source: BTCUSD on TradingView
Featured Image by Kanchanara at Unsplash.com, Charts by TradingView.com, CryptoQuant.com
