Bitcoin Coinbase Premium Index Has Plummeted Over The Past Month, Here's What This Could Mean For BTC's Price

As explained by an analyst in a CryptoQuant Quicktake post, the BTC Coinbase Premium Index has seen a sharp drawdown into negative territory recently.

Data shows the Bitcoin Coinbase Premium Index has plunged to two-year lows in recent weeks. Here’s what this could mean for BTC’s price.

Bitcoin Coinbase Premium Index Has Plummeted Over The Past Month

As highlighted by an analyst in a CryptoQuant Quicktake post, the BTC Coinbase Premium Index has seen a sharp drawdown into negative territory over the past month. The “Coinbase Premium Index” here refers to an indicator that tracks the difference between the Bitcoin price listed on Coinbase (USD pair) and that on Binance (USDT pair).

This metric's value can provide insight into the contrasting buying and selling behavior patterns of investors present on the two cryptocurrency exchange behemoths. To be more precise, the indicator showcases how the activities of American institutional investors (the dominant force on Coinbase) differ from those of global whales.

When the Coinbase Premium Index has a positive value, it signifies that the asset is trading at a higher rate on Coinbase as compared to Binance. Such a trend suggests that US-based whales are participating in a higher amount of buying (or lower amount of selling) as compared to global investors.

On the other hand, values below zero indicate that Binance users are buying at a higher rate, as the coin is priced higher on the exchange.

Now, here is a chart that shows the trend in the Bitcoin Coinbase Premium Index over the past year:

As can be seen from the chart above, the Bitcoin Coinbase Premium Index was in positive territory during the cryptocurrency's ascent to new highs in the last two months of 2024. The pattern observed throughout the year was that the American institutional investors played a leading role in the market, with shifts in buying and selling pressure from them being reflected in the asset's price.

However, in mid-December, the indicator began to dip into negative territory and has remained there since. BTC's spot value has also continued to decrease during this time, indicating that Coinbase whales are still playing a primary role in the market.

With the latest decrease, the Coinbase Premium Index has now dropped below its lowest point in October. In fact, the indicator is currently at its lowest value since November 2022, over two years ago.

Considering that the Coinbase whales have been largely responsible for Bitcoin's direction in the past year, the indicator remaining in a downtrend could bode poorly for the cryptocurrency's price.

However, historically, the asset has tended to bottom out when selling pressure on Coinbase has become too strong, as new buyers eventually emerge to buy coins at a cheaper rate from the sellers. The sharp negative spike around the FTX crash also marked a major bottom for BTC.

It now remains to be seen whether the FUD from the US-based investors has reached a high enough level for a bottom to be formed.

BTC Price

Bitcoin has started the new year on a positive note, with its price recovering to the $96,600 level.