Bitcoin Coinbase Premium Turns Deep Red: What Does It Mean?

Data shows the Bitcoin Coinbase Premium Gap has turned negative recently. Here’s what this could mean for the asset’s price.

Bitcoin Coinbase Premium Gap Has Just Observed A Deep Plunge

As an analyst in a CryptoQuant Quicktake post explained, the Coinbase Premium Gap has seen a rapid trend reversal recently. The “Coinbase Premium Gap” here refers to an indicator that keeps track of the difference between the Bitcoin prices listed on Coinbase (USD pair) and Binance (USDT pair).

When the value of this metric is greater than zero, it means the price of the asset listed on Coinbase is greater than that on Binance. Such a trend implies that users on the former are participating in a higher amount of buying or a lower amount of selling than users on the latter.

On the other hand, the indicator being negative suggests the buying pressure on Coinbase may be lower than on Binance as BTC is trading at a cheaper rate there.

Now, here is a chart that shows the trend in the Bitcoin Coinbase Premium Gap over the last couple of days:

Looks like the value of the metric has been quite negative recently | Source: CryptoQuant

As displayed in the above graph, the Bitcoin Coinbase Premium Gap had surged to notable positive levels following the recovery push in the price driven by the US Federal Reserve (Fed) interest rate cut announcement.

This suggested that Coinbase users had enthusiastically participated in buying after the news. Coinbase is the primary platform of US-based investors, especially the large institutional entities, so it makes sense that users would react to an America-specific event.

While the indicator had been positive earlier, its value has observed a crash deep into the negative zone today. This could potentially imply that US-based holders have just participated in a selloff.

Bitcoin has held a close relationship with the Coinbase Premium Gap during the year 2024 so far, so this red spike could spell trouble for the asset’s price. This is assuming that the spike indeed corresponds to selling from the American institutional investors.

Another way to interpret the spike could be that a large amount of buying has occurred on Binance, which is why the price on Coinbase has been left behind.

Since Bitcoin hasn’t seen any significant bearish price action since this trend has developed in the indicator, this scenario may even be the more likely. However, the metric could still be to keep an eye on shortly, as lasting forays in the negative zone have usually proven to be bearish for the price.

If the Coinbase Premium Gap remains negative and BTC continues to be unaffected, then it would imply a shift in market structure has occurred, with Binance traders taking the lead, something that hasn’t happened this year too often.

BTC Price

At the time of writing, Bitcoin is trading around$62,700, up more than 5% over the last week.

The price of the coin appears to have been going up over the last few days | Source: BTCUSDT on TradingView

Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com