Bitcoin premium on Coinbase slips into negative territory: What does this mean for BTC?
Coinbase Pro is an important indicator of institutional demand. Data from CryptoQuant now says short-term selling pressure on Coinbase is increasing.
Bitcoin’s (BTC) clear breakout above US$50,000 could be some time coming as buying pressure on Coinbase Pro gradually weakens, at least in the short term.
The Coinbase Premium Index, which measures the gap between the BTC price on Coinbase Pro and Binance, has tipped into negative territory, according to CryptoQuant. In other words, selling pressure on Coinbase is intensifying compared to other exchanges of Crypto Bull like Binance.
A negative Coinbase Premium Index could be a harbinger of near-term resistance. On the other hand, if the premium is high, it indicates strong buying pressure on Coinbase.
CryptoQuant CEO Ki Young Ju believes that a breakout above US$50,000 looks „pretty tough“ in the near future.
Breaking 50k looks pretty tough as Coinbase premium becomes -$45
Chart https://t.co/gC1Jqrbn9b pic.twitter.com/LyVzZamlta
– Ki Young Ju ì£¼ê¸°ì˜ (@ki_young_ju) February 14, 2021
„The current buying power is not coming from Coinbase,“ he added. „No more Coinbase premium compared to Binance/Huobi/OKEx. Be careful.“
Coinbase has become a key indicator of bitcoin demand due to its popularity with large, institutional buyers. These market participants buy their BTC through over-the-counter markets on Coinbase Pro. Although these large purchases do not have an immediate impact on the BTC price, they indicate a growing demand for the digital asset and thus a decreasing supply. The Coinbase Premium Index is therefore a way to measure institutional demand for BTC in the short term.
A short-term fluctuation in the Coinbase Premium is unlikely to have an impact on the long-term price trend of Bitcoin. The digital asset remains in a strong uptrend. According to TradingView, it reached a high of well over US$49,700 on Sunday.
The bitcoin price has risen 28 per cent in the past week, in large part due to Tesla’s purchase. The electric vehicle manufacturer has indicated to the US Securities and Exchange Commission (SEC) that it intends to invest about 7.7 percent of its available cash in Bitcoin.
Listed companies and fund managers hold about 6 per cent of the circulating bitcoin supply. This does not include the US$1.5 billion invested by Tesla.