31 July 2024
An analyst from the CryptoQuant QuickTake platform has now drawn attention to a particular trend tied to the Coinbase Premium Index (CPI) which currently suggests a grim move brewing for Bitcoin.
This indicator, when placed with its Simple Moving Average over 14 days (SMA14), has often shown a significant correlation with Bitcoin’s selling pressure, shedding light on how crucial its impact is on the market.
Bull or Bear: What the Coinbase Index Tells Us
Before diving into what the Coinbase Premium Index is currently signalling for Bitcoin, it is worth explaining further the essence of this indicator to grasp the credibility of it. Notably, the Coinbase Premium Index (CPI) is an analytical tool that measures the variance between Bitcoin’s price on Coinbase Pro and its price on other major exchanges.
A negative CPI value suggests that Bitcoin is trading at a lower price on Coinbase Pro compared to other platforms, which typically indicates a selling pressure in the US market.
Related Reading: Bitcoin Eyes $63,000: Key Indicators Signal Further Decline – Time To Sell?
According to the CryptoQuant analyst with the name ‘burakkesmeci,’ this phenomenon has been observed more frequently after the US approved the trading of spot exchange-traded funds (ETFs), which currently seems to have amplified the significance of CPI as a leading indicator.
When Coinbase Premium Index is below SMA14, selling pressure increases
“Examining the data for 2024, we clearly see that Bitcoin price corrections have occurred when the CPI (Coinbase Premium Index) fell below its’ SMA14.” – By @burak_kesmeci
Link https://t.co/Bc3N1cfh5W pic.twitter.com/tN99LNhNkr
— CryptoQuant.com (@cryptoquant_com) July 30, 2024
The analyst disclosed that for 2024, the data reveals a clear pattern: Bitcoin often faces price corrections when the CPI dips below its SMA14. This specific behaviour points to a bearish sentiment when the index falls short of the moving average, signaling increased selling activity.
Currently, the CPI stands at -0.008, contrasting with the SMA14 at 0.020. This discrepancy according to burakkesmeci “indicates that sellers have a stronger hand in the US market.”
Bitcoin Market Performance
Looking at Bitcoin’s market performance so far, the phenomenon of a seller-driven market, as indicated by the CPI, appears to hold true. Currently, Bitcoin trades at a price of $65,805, marking a 3% dip in the past 24 hours and roughly 2% in the past week.
In the past day alone, the asset’s market cap has declined by over $40 billion, a stark contrast to its 24-hour trading volume, which has seen quite the opposite, surging from below $30 billion as of yesterday to as high as $36.7 billion, at the time of writing.
Regardless of the price performance, a handful of crypto analysts remain optimistic. For instance, Crypto Rover, a renowned enthusiast in the crypto space, disclosed that Bitcoin is currently just consolidating inside a notable bull flag pattern.
According to Rover, “This is the worst time to be bearish. The breakout will be massive.”
#Bitcoin is basically consolidating in one of the largest bull flags I’ve ever seen.
This is the worst time to be bearish.
The breakout will be massive. pic.twitter.com/oauSgiBNRY
— Crypto Rover (@rovercrc) July 30, 2024
Featured image created with DALL-E, Chart from TradingView