A quantitative analyst has elucidated the implications of a potential leading Bitcoin indicator, shedding light on what it could signify for the cryptocurrency’s future price movements.
The Bitcoin Coinbase Premium Might Provide Insight into BTC’s Next Move
In a recent CryptoQuant Quicktake post, an analyst discussed the current trend in the Bitcoin Coinbase Premium. The quant noted, “We can use the trend of Coinbase Premium as a leading indicator of the future direction of BTC price.”
The “Coinbase Premium” is a metric that tracks the variance between the Bitcoin price listed on the cryptocurrency exchanges Coinbase (USD pair) and Binance (USDT pair).
A positive value of this indicator indicates that the Coinbase price is higher than that on Binance, suggesting higher buying pressure or lower selling pressure on the former platform.
Conversely, a negative premium suggests that Coinbase may be experiencing more selling pressure than Binance, resulting in a lower asset price there.
Below is a chart illustrating the trend in the 30-day moving average (MA) of the Bitcoin Coinbase Premium over the past few years:
The 30-day moving average (MA) of this metric has shown a recent decline | Source: CryptoQuant
As depicted in the graph above, the 30-day MA of the Bitcoin Coinbase Premium has recently remained positive, indicating that Coinbase users have been supporting the asset throughout its rally.
Coinbase is renowned as the preferred platform for US-based institutional entities, while Binance boasts a more global user base. Consequently, the premium’s value can offer insights into how the behavior of American whales contrasts with that of the rest of the world.
From the chart, it is evident that the buying pressure from these institutional traders peaked alongside the price peak but has since dwindled. Although the metric remains generally positive, it is now approaching the neutral zero mark.
Highlighted in the graph by the analyst is an intriguing pattern that the cryptocurrency has followed concerning the Coinbase Premium over the past two years. It appears that whenever the indicator has bottomed in negative territory and reversed back to an uptrend, the coin’s price has experienced a rebound.
This trend was evident earlier this year when a reversal in the indicator preceded a rally in Bitcoin’s price, eventually leading to a break of its all-time high.
Currently, the Coinbase Premium is on a downward trend, but it has yet to dip into negative territory. The analyst suggests that BTC is in a “wait and see” phase, indicating that a rebound might take a bit longer. The metric must first decline further and reach a reversal point, at least if the historical pattern is to repeat.
Although Bitcoin briefly slipped below $61,000 earlier, it has experienced a slight rebound in the past day, climbing back above $62,700.