One quantitative analyst has explained what a potential leading Bitcoin indicator could say about what's next for the cryptocurrency's price.
Bitcoin Coinbase Premium may hold the answer to BTC's next trend
In CryptoQuant Quicktake mail, one analyst spoke about the trend currently occurring in Bitcoin Coinbase Premium. “We can use the Coinbase Premium trend as a leading indicator of the future direction of the BTC price,” notes the quantitative analyst.
“Coinbase Premium” is a metric that tracks the difference between the price of Bitcoin listed on cryptocurrency exchanges Coinbase (USD pair) and Binance (USDT pair).
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When the value of this indicator is positive, it means that the price listed on Coinbase is higher than the price of Binance at the moment. Such a trend indicates that buying pressure is higher (or selling pressure is lower) on the first platform compared to the last platform.
On the other hand, a negative premium suggests that Coinbase may see a greater amount of selling from Binance, as the asset is currently trading at a lower price there.
Now, here's a chart showing the trend in the 30-day moving average (MA) for Bitcoin Coinbase Premium over the past two years:
The 30-day MA value of the metric seems to have been going down in recent weeks | Source: CryptoQuant
As shown in the chart above, the 30-day MA Bitcoin Coinbase Premium indicator has been positive recently, indicating that Coinbase users supported the asset during the rally.
Coinbase is widely known as the platform of choice for US-based institutional entities, while Binance has a more global user base. As such, the value of the premium could provide hints about how the behavior of American whales differs from that of the rest of the world.
From the chart, it seems clear that the buying pressure from these institutional traders peaked along with the price top but has since started to decline. The measure remains generally positive, although it is now very close to the neutral zero mark.
In the chart, the quantification highlighted an interesting pattern that the cryptocurrency has followed in relation to Coinbase Premium over the past two years. It seems that whenever the indicator bottoms in negative territory and reverses back to the upside, the coin price sees a recovery.
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An example of this trend also appeared earlier in the year, when an indicator reversal led to Bitcoin observing a rally as the asset would eventually break its all-time high.
Coinbase Premium is currently on a downtrend, but it has not yet dropped into negative territory. The analyst explains that Bitcoin is in a “wait and see” phase, where the recovery may be a little longer. The scale must first decline further and reach the reversal point, at least if the historical pattern is to be repeated.
Bitcoin price
Bitcoin fell below $61,000 earlier, but the asset found a slight rebound in the past day, returning to above $62,700.
Looks like the price of the coin has shot up over the last 24 hours | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, CryptoQuant.com, chart from TradingView.com
