Coinbase Pro is a big bellwether to institutional demand. Now, data from CryptoQuant shows that the short-term sales pressure on Coinbase is mounting.
Bitcoin’s (BTC) final breakout over $50,000 will have to wait longer to materialise as spot trading pressure on Coinbase Pro shows signs of weakening—at least in the short term.
According to CryptoQuant, the Coinbase Premium Index, which calculates the difference between the BTC price on Coinbase Pro and Binance, has turned negative. In other words, selling pressure on Coinbase seems to be growing compared to other exchanges like Binance.
Negative readings on the Coinbase Premium Index may be a precursor to short-term resistance. On the other hand, when the premium is high, it implies a heavy purchasing pressure on Coinbase.
Based on the index, CryptoQuant CEO Ki Young Ju claims that topping $50,000 “looks pretty tough” in the near term.
Breaking 50k looks pretty tough as Coinbase premium becomes -$45
— Ki Young Ju 주기영 (@ki_young_ju) February 14, 2021
“Current buying power doesn’t come from Coinbase,” he added. “No more Coinbase premium compared to Binance/Huobi/OKEx. Be careful.”
Coinbase has become a big bellwether to Bitcoin’s demand due to its popularity among massive, institutional buyers. These market participants obtain their BTC through the over-the-counter markets of Coinbase Pro. Although these large transactions do not instantly affect the price of the BTC, they reflect an increasing demand for the digital asset and, in turn, a decrease in supply. The Coinbase Premium Index is therefore one way of calculating the institutional demand for BTC in the short term.
A short-term fluctuation in the Coinbase premium doesn’t appear to have any bearing on Bitcoin’s long-term trajectory. The digital asset remains in a strong uptrend, having peaked well north of $49,700 on Sunday, according to TradingView data.hi
The Bitcoin price has risen by 28 percent over the past week, thanks in large part to Tesla’s expected acquisition of the commodity. Based on the latest 10K electric vehicle manufacturer filing with the United States Securities and Exchange Commission, it plans to devote about 7.7% of its gross cash balance to Bitcoin.
Publicly-traded companies and fund managers hold roughly 6% of Bitcoin’s circulating supply — a figure that doesn’t include Tesla’s $1.5 billion position.
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