Data shows that the Bitcoin premium on Coinbase has soared amid the recent rally. Here’s what that says about the source of the increase.
Bitcoin Coinbase Premium Spread Turned Extremely Positive
As Maartunn, community manager of CryptoQuant Netherlands, points out in a new post
The “Coinbase Premium Gap” is an indicator that tracks the difference between Bitcoin prices listed on cryptocurrency exchanges Coinbase and Binance.
If the value of this metric is positive, it means that the price listed on Coinbase is currently higher than that of Binance. Such a trend implies that the buying pressure of the first users is higher than that of the second ones (or that the selling pressure is lower).
On the other hand, a negative value suggests that Binance is experiencing higher buying pressure than Coinbase because the price listed there is higher.
As seen in the chart above, the Bitcoin Coinbase Premium Gap turned significantly positive yesterday, indicating that buying pressure on the platform has increased sharply. Since then, the indicator has continued to increase.
Coinbase is known to be used by institutional entities based in the United States. Therefore, the metric value can provide an indication of how the buying or selling pressure of these large US investors compares to that of Binance’s global user base.
Given that the Coinbase Premium Gap was positive over the past day, it seems possible that US institutional investors were involved in the accumulation.
The chart shows that along with the increase in the indicator’s value, the price of Bitcoin has also skyrocketed, crossing the $45,000 mark for the first time since April 2022.
Given the timing, it is likely that buying pressure from US whales was a driver (if not the main reason) of the cryptocurrency’s recent uptrend.
This rise occurred as the industry eagerly awaited the approval of spot exchange-traded funds (ETFs) for the asset, which many expect will happen soon. These US institutional investors might also buy into the same hype.
Maartunn previously explained that a correlation had emerged between the BTC spot price and the Coinbase Premium Gap. This latest event shows that this correlation, which existed during the last month of 2023, could continue until the beginning of 2024.
Bitcoin hit a high of $45,900 during the day, but has since seen a decline to as low as $45,500.