Coinbase Bitcoin Premium Index Dips to Unprecedented Negative Levels Market Nearing Bottom

Coinbase Bitcoin Premium Index Dips to Unprecedented Negative Levels Market Nearing Bottom

Coinbase Bitcoin Premium Index Dips to Unprecedented Negative Levels Market Nearing Bottom

According to a report by CoinDesk, blockchain data analytics firm CryptoQuant’s data indicates that Coinbase’s premium index has dropped to unusually negative levels. Such deep negatives have historically appeared near local price bottoms, suggesting a possible signal that Bitcoin is bottoming out.

David Lawant, research head at institutional crypto trading platform FalconX, stated on the X platform:


Source:
David Lawant

The Coinbase premium index measures the difference between Bitcoin prices on Coinbase Pro (widely used by U.S. users and many institutional market participants) and on the offshore exchange Binance (leading in trading volume and popular among retail users).

Data shows that the Coinbase premium index has been predominantly negative for most of June and May, resembling periods of market downturn in August and September last year. Last Friday, the index dropped to nearly -0.19, the lowest reading within a daily timeframe since the November 2022 closure of FTX exchange.

Coinbase Bitcoin premium index (Source: CryptoQuant)

This negative level indicates weak demand from U.S. investors and selling pressure, as Bitcoin has been consolidating within a range since hitting historical highs in March. Investors are increasingly concerned about capital outflows from U.S.-based Bitcoin spot ETFs (many of which settle through Coinbase) and potential asset sell-offs by the U.S. government via Coinbase, which could lead to discounts on Coinbase prices.

However, such deep Coinbase discounts have previously occurred near local Bitcoin price bottoms, followed by significant rebounds over the subsequent months, such as the negatives seen in November 2022 and August 2023. Lawant of FalconX told CoinDesk:

With several upcoming catalysts centered around the U.S., such as ETF fund flows, U.S. monetary policy, and the presidential election, Lawant expects this trend to persist, stating: