In early July, the Coinbase premium turned positive after a period of concern following a dip in mid-May. Research from Kaiko suggests that this shift could indicate a resurgence of institutional interest in Bitcoin. The Coinbase premium, which measures the difference between hourly bitcoin prices on Coinbase’s BTC-USD pair and Binance’s BTC-USDT pair, is a key indicator of institutional sentiment in the cryptocurrency market. This positive turn in early July followed its lowest level since the Terra collapse in 2022, witnessed at the end of June.
Historical Analysis of Coinbase Premium
Crypto analyst David Lawant pointed out in early July that the Coinbase premium had fallen to worrying lows, similar to a previous occurrence where a major crypto rally followed months after the premium had turned negative. Lawant’s analysis suggested that the premium could once again signal an upcoming market rally. By July 15, the premium surged to a two-month high, reinforcing Lawant’s bullish outlook. Given that institutional trading volume makes up over 80% of activity on Coinbase, the premium is often seen as a measure of institutional sentiment.
Historically, the Coinbase premium has been closely linked with major market events. The collapses of Terra and FTX significantly reduced institutional demand for Bitcoin, causing the premium to dip into negative territory. However, the recent positive shift in the premium suggests an increase in institutional interest in BTC. Market analyst HornHairs interprets bitcoin’s largest Coinbase premium in two months as a sign that the current rally is primarily driven by spot buying.
Spot-driven rallies are typically seen as more sustainable and less risky compared to those driven by speculative derivatives products. When bitcoin commands a higher price on the largest U.S. exchange, it indicates significant buying pressure from U.S. investors. This suggests that the rally, if sustained, will be led by altcoins within the Bitcoin and Ethereum blockchains, given their prominence as the first and second-largest networks in the crypto industry.
The positive turn in the Coinbase premium in early July may hint at a resurgence of institutional interest in Bitcoin. This shift could potentially lead to a sustainable rally primarily driven by spot buying, which is considered healthier for the market in the long run. As institutional sentiment plays a crucial role in the cryptocurrency market, monitoring indicators such as the Coinbase premium can provide valuable insights into market trends and potential future developments.
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