Bitcoin has stagnated around the $ 20k threshold over the past few days. As a result, investors have benefited considerably from Bitcoin’s discounted price.
According to data from Crypto Quant, the Coinbase Premium Index entered positive territory for the first time since April 2022. Well, not only has it changed to green, but it has also risen to a level last seen in May last year.
A high reading on the Coinbase Premium Index usually means that investors are willing to pay an extra amount to acquire Bitcoin. While the current state of this benchmark indicates rising demand and a strong buying bias among US investors, is it strong enough to promote a lead for BTC?
Bitcoin does not have the wings to fly
Coinbase, as an exchange, has a significant say in the crypto market. According to CMC’s market share data, it ranks third. In terms of volume completed, however, it ranks fairly behind its top competitors. When judging the numbers below, it can be deduced that Coinbase is clearly below the thumb of Binance and FTX.
To continue, it should be noted that Bitcoin’s price did not rise every time Coinbase’s premium was positive. When the tip rose in May last year, Bitcoin’s price continued to fall. However, by the last few months of 2021, and during the February-March period this year, Bitcoin has responded positively to the premium paid by American investors.
In April, however, the positive premium once again supported Bitcoin’s price. The same can be observed from the first graph attached.
Other premium indices, such as the CPI, remain unaffected. According to data from CQ, the Korea Premium Index has fallen from 2.24 to 0.07 over the past day. The same reveals the dwindling buying interest. It can therefore be deduced that accumulation bias remains US-centric.
The increase in the total exchange net flow supported the said narrative. Over the last three days, this measure has remained negative, indicating that bulls had a slight advantage. On Friday, however, the number was positive, implying that investors have already started abandoning their Bitcoin.
Furthermore, trader sentiment remained divided at press time. The funding rate for Bitcoin remained positive on some exchanges while it stood negative on the rest.
So, while the Coinbase Premium Index is positive, it does not necessarily guarantee a Bitcoin rally as it does not have sufficient support from other market factors.