Bitcoin may have hit bottom, discount on the Coinbase Premium Index shows

Bitcoin (BTC) is trading at a discount on Coinbase, which some analysts feel could signal a price bottom for the largest cryptocurrency. While the top crypto is showing strength to start the week, analysts noted that BTC failed to maintain its positive tone at the start of the year. In recent weeks, asset-specific factors have added further headwinds to digital asset prices, ending the first half with a whimper. Still, some analysts have different opinions.

David Lawant, head of research at FalconX, commented on the data on X, saying “Always darkest before the dawn. The last time the Coinbase premium was this negative was a couple of months before the massive rally from Oct ’23 to March ’24.”

The Coinbase Premium Index compares the price of Bitcoin between Coinbase, a platform popular among U.S. consumers and institutional investors, and Binance, the largest exchange by trading volume and favored by retail users. Throughout much of May and June, this index was negative. On Friday, the index fell to roughly -0.19, its lowest point since the bankruptcy of the cryptocurrency exchange FTX.

Implications of negative Premium Index

Negative results on this index indicate low demand and selling pressure from US investors. Bitcoin has traded in a confined range since reaching all-time highs in March. Outflows from U.S.-listed spot BTC exchange-traded funds (ETFs) and the US government’s selling of seized assets through Coinbase have heightened investor fears.

At least recently, the Coinbase premium has become a reliable, confirming, and sometimes even leading indicator of overall market trends. This underscores the significant influence of the U.S. market in determining market price formation.

David Lawant

Often, sharply negative Coinbase Premium readings have frequently foreshadowed local price lows and subsequent large rallies. The index’s low in August 2023 occurred just before Bitcoin’s bottom around $25,000. The crypto subsequently drifted in a narrow range until October, when it nearly doubled in price by January, buoyed by expectations for upcoming Bitcoin ETFs in the United States.

Also Read: What to expect from Bitcoin in July

Most recently, the Coinbase Premium Index fell to -0.17 amid the market capitulation on May 1, when Bitcoin dropped to $56,000. BTC then soared almost 27% to $72,000 in June before declining.

Bitcoin reclaims $63K to kick off the second half 

It was a good start to the second half of the year for cryptocurrencies and stocks, as asset prices rose on Monday after the latest U.S. manufacturing activity data showed the Institute for Supply Management’s manufacturing PMI fell further into contraction territory in June, reaching a four-month low.

This boosted the chances that the Federal Reserve will shift an interest rate policy in September, as the economy shows symptoms of slowing. Investors are awaiting the June employment data, which is out on Friday. They hope it will reveal further signs of labor market cooling, which might provide additional support for interest rate cuts.

TradingView said Bitcoin (BTC) climbed back above support at $62,800 yesterday and hit a daily high of $63,820 in the afternoon, erasing the losses recorded last week.  

Currently, Bitcoin is trading at $62,831, aligning closely with its 100-hourly Simple Moving Average. The BTC/USD hourly chart also shows an upward-trending bullish trend line, providing support for around $62,800.

If there is another increase, the price could face resistance near the $63,250 level. The first key resistance is near the $63,650 level. The following key resistance could be $64,000. A clear move above the $64,000 resistance might start a steady increase and send the price higher.

Cryptopolitan Reporting by Florence Muchai