Bitcoin Coinbase Premium Giving Potential Buy Signal, Quant Says

A quant has explained how the latest trend in the Bitcoin Coinbase Premium Index could imply a buying opportunity for the asset.

A quant has highlighted a possible buying indicator for Bitcoin (CRYPTO: BTC) as the latest trend in the Bitcoin Coinbase Premium Index could be signaling buying activity.

Coinbase Premium Index Drops To -0.221%

In a CryptoQuant Quicktake post, an analyst noted the latest development in the Bitcoin Coinbase Premium Index. The “Coinbase Premium Index” is an indicator that tracks the percentage difference between the BTC price on Coinbase (USD pair) and that on Binance (USDT pair).

When the value of this indicator is positive, it signifies that the cryptocurrency is trading at a higher price on Coinbase than on Binance. Such a trend suggests there is a higher buying pressure or a lower selling pressure present on the former as compared to the latter.

On the other hand, the indicator being below the zero mark suggests that Binance users are participating in a higher amount of buying than Coinbase ones as they have pushed BTC to a higher value there.

Now, here is a chart that shows the trend in the Bitcoin Coinbase Premium Index over the last few months:

As can be seen here, the Bitcoin Coinbase Premium Index has seen a sharp decline into the negative region recently, indicating the emergence of selling activity on Coinbase.

Interestingly, as this selling has occurred, the BTC price has also declined, suggesting that the negative premium may be a factor in the price decrease.

Throughout the year, BTC’s price has followed the indicator in this manner, moving up and down with the shifts in buying and selling on Coinbase.

The reason behind this relationship could be that Coinbase is known to host US-based institutional investors, who have had a strong presence in the market this year.

Hence, the Coinbase Premium Index turning red would naturally imply that these giant investors are selling. Considering that BTC’s price has been following the indicator, this would be a bearish signal for the asset.

However, there is another trend that could be indicating a different outcome for Bitcoin (CRYPTO: BTC).

As highlighted by the quant in the chart, the indicator has seen a rebound whenever its value has reached the -0.2% mark during the past year.

The reasoning behind this pattern could be that it’s usually around this level of selling that new buyers show up and decide to accumulate on the dip, pushing the indicator and the price up in the process.

Currently, the indicator’s value is at -0.221%, so it’s possible that Bitcoin could be close to reaching a bottom, if it hasn’t already formed one. Of course, this would only be the case if the institutional investors still believe in the bull run.

BTC Price

Bitcoin briefly fell below the $93,000 level on Wednesday, but it seems the coin has found a rebound as its price is now trading around $94,100 at the time of writing.