There is a popular indicator that crypto experts are closely watching whether US-based investors, especially institutions, are actually buying bitcoin or sitting on the sidelines watching the market.
It’s called the Coinbase Premium Index, and it’s now flashing the most sustained bullish signal since bitcoin traded at a record high above $126,000 in October.
This index has been positive for 14 consecutive days, from April 9 to today, April 22, according to data source Coinglass. It is the longest unbroken stretch of positive readings since October.
Here’s why it’s important
Nasdaq-listed Coinbase is the top exchange for US institutions – corporate government bonds, hedge funds and regulated alternative investment vehicles such as ETFs. So when bitcoin’s price is trading at a premium on Coinbase to prices on offshore giant Binance, it means US buyers are aggressive in buying BTC. Historically, strong buying by US investors has been a hallmark of bull runs.
The opposite, a negative premium or discount, signals that US demand is lagging while offshore markets do the heavy lifting. For context, the premium was mostly negative from mid-December to late February. During that time, BTC dropped from around $100,000 to almost $60,000.
The recent stretch of positive readings is all the more important as it shows sustained demand through geopolitical noise, DeFi crisis.
It is no surprise that bitcoin is on the rise. The cryptocurrency topped $78,000 on Wednesday, bringing the monthly gain to 14%.
