Bitcoin Coinbase Premium Index Plunges Down, What Does It Mean?

Data shows the Bitcoin Coinbase Premium Index has plunged down recently, here’s what has happened in the past during instances of such a trend.

Bitcoin Coinbase Premium Index Has Sharply Gone Down Recently

As pointed out by an analyst in a CryptoQuant post, the BTC volatility has usually increased in the past when the metric has reached the same levels as now.

The “Coinbase Premium Index” is an indicator that measures the percentage difference between the Bitcoin price on Coinbase Pro (USD pair) and the one on Binance (USDT pair).

Coinbase is a popular crypto exchange among US investors (especially large institutionals), while Binance has a more global userbase.

This means that the difference between the BTC prices on the two platforms can hint whether US investors are applying more buying pressure on the market than the global investors or not.

Now, here is a chart that shows the trend in the 30-day simple moving average Bitcoin Coinbase Premium Index over the last couple of weeks:

The 30-day SMA value of the metric seems to have sharply declined in recent days | Source: CryptoQuant

As you can see in the above graph, the 30-day SMA Bitcoin Coinbase Premium Index has plummeted down recently.

This suggests that right now there is a minimal difference between the price listed on Coinbase and that on Binance.

In the chart, the quant has highlighted past instances of similar trend in the indicator during the last couple of weeks.

It looks like usually whenever the Coinbase Premium Index has declined to low levels comparable to the current one, Bitcoin has observed an increase in volatility shortly after.

If a similar pattern takes hold this time as well, then the crypto’s price could see even more volatility in the short term.

In the past, this kind of volatility has taken the price in either direction, so it’s hard to say whether it will have a bullish or bearish effect on the market.

One thing is clear though, investors in the US aren’t providing a stronger buying pressure than global holders at the moment.

BTC Price

At the time of writing, Bitcoin’s price floats around $20.4k, up 4% in the last week. Over the past month, the crypto has gained 5% in value.

The below chart shows the trend in the price of the coin over the last five days.

Looks like the value of the crypto has been trading sideways above the $20k mark during the past few days | Source: BTCUSD on TradingView

Featured image from Viktor Forgacs on Unsplash.com, charts from TradingView.com, CryptoQuant.com