Bitcoin (BTC) is currently experiencing a discount on Coinbase, which some experts speculate could signal a potential price bottom for the cryptocurrency. According to David Lawant, head of research at FalconX, the “Coinbase Premium Index” has shown negative values, a trend observed prior to significant rallies from October 2023 to March 2024.
The Coinbase Premium Index measures the price differential of Bitcoin between Coinbase, a platform favored by U.S. users and institutional investors, and Binance, a leading exchange popular among retail traders. Throughout May and June, this index has consistently shown negative readings. On Friday, the index dropped to nearly -0.19, marking its lowest level since the collapse of FTX crypto exchange in November 2022.
Negative readings on the index typically suggest subdued demand and selling pressure from U.S. investors. Bitcoin has been trading within a narrow range following its peak in March, amid concerns fueled by outflows from U.S.-listed spot BTC exchange-traded funds (ETFs) and the U.S. government’s sale of seized assets through Coinbase.
Historically, deeply negative readings on the Coinbase Premium Index have often preceded local price bottoms and subsequent significant price rallies. For instance, in August 2023, a low point in the index coincided with Bitcoin bottoming around $25,000. The cryptocurrency then consolidated until October, before nearly doubling in value by January, driven partly by anticipation of upcoming U.S. Bitcoin ETFs. Recently, a dip in the index to -0.17 on May 1 preceded a 27% BTC rally to $72,000 in June, followed by a subsequent decline.
The fluctuating Coinbase Premium Index serves as a key metric for market analysts, potentially indicating shifts in investor sentiment and future price movements for Bitcoin.
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