Plunge in Coinbase premium reaches 12-month record low.
In recent developments, Bitcoin's price has been on a steady incline, currently trading around $96,760, up 3.5% from 24 hours ago, according to CoinGecko. However, this upward trend was not without its challenges. A notable event occurred when a CryptoQuant contributor revealed that holders were actively selling Bitcoin as its price approached the psychological $100,000 mark.
One of the key contributing factors to this negative sentiment was the low Coinbase premium of -0.237 for Bitcoin by early 2025. This negative premium, which indicates Bitcoin trading at a discount on Coinbase relative to other exchanges like Binance, was primarily due to weakened demand from U.S. investors, especially institutional and retail buyers.
According to CryptoQuant analyst Burak Keşmeci and supporting market analysis, several factors played a role in this shift. One of the key factors was the declining inflows and rising outflows from U.S.-based Bitcoin ETFs, for which Coinbase acts as a custodian. These ETF fund flows saw net outflows, indicating investors cashing out profits after a recent Bitcoin rally.
Another factor was a shift in market dynamics with reduced institutional demand on Coinbase, a key platform used by sophisticated U.S. investors and institutions. Historically, Bitcoin rally highs correlated with a positive Coinbase premium, so a negative premium signals weakening U.S. buying interest.
Broader market factors such as the response to the U.S. Federal Reserve’s interest rate decisions also played a role, causing increased selling pressure and a cooling of Bitcoin’s price momentum. While Bitcoin price held above $115,000, the negative premium ended a long streak (62 days) of sustained U.S. buying dominance.
The market experienced heightened volatility and growing uncertainty, further encouraging U.S. investors to liquidate. This behavior was reflected in the Coinbase Premium Index dipping below zero for the first time since May, a sign interpreted as profit-taking or reduced conviction among U.S. buyers.
The decline in the Coinbase premium is linked to the drop in Bitcoin's price to $91,500. Burak Keşmeci attributes this decline to the intensifying selling pressure and low liquidity in the market. The previous low (-0.2) was recorded on October 25, 2024, amidst growing uncertainty ahead of the U.S. presidential elections.
In light of these developments, Burak Keşmeci emphasizes that changes in macroeconomic conditions and the return of institutional activity are needed to revitalize the Bitcoin market. He also notes that the dynamics in the Coinbase premium could hinder Bitcoin's price recovery in the short term, as the drop in Bitcoin's price reflects the caution of American investors.
Technology played a significant role in the recent Bitcoin market trends, as analysts closely monitored trading activities on platforms like Coinbase and Binance. This was evident when the low Coinbase premium of -0.237 for Bitcoin by early 2025 indicated weakened demand from U.S. investors, particularly institutional and retail buyers, leading to a shift in market sentiment and reduced investment in Bitcoin, thereby affecting the overall finance and investing landscape of digital currencies.
