After falling 13% on Thursday, Bitcoin’s pullback has continued into Friday, plummeting as low as $28,845. The leading cryptocurrency has been able to gain back some of those losses, trading above $31,000 as of press time.
Ki-Young Ju, the CEO of blockchain analytics firm CryptoQuant, cited a negative “Coinbase premium” as evidence of weak dip demand from large investors.
“Here’s why we need to pay attention to Coinbase Premium. It was always above +$50 when BTC was about to break 20k, 30k, and 40k. Meaning there were huge spot inflows from high net-worth individuals and institutional investors in Coinbase,” he tweeted.
CryptoQuant’s Coinbase premium indicator measures the spread between Coinbase’s BTC/USD pair and Binance’s BTC/USDT pair. A positive spread implies strong institutional inflows, as Coinbase is the home to many high net-worth individuals and institutional investors.
The current spread remains flat to negative, implying a lack of dip demand from big investors. To no surprise, the Coinbase premium has sunk to as low as -$227 in the past 24 hours.
This is in contrast to a few weeks ago, when Bitcoin consistently traded at a premium of over $50 on Coinbase. Throughout the rally from $20,000 to $40,000, indicating major spot market inflows from large investors.
Matthew Dibb, COO and co-founder of Singapore-based Stack Funds, also pointed to the negative Coinbase premium as a cause of concern for the bulls.
Bitcoin Breaks Short-Term Support
“Bitcoin broke short-term support on Thursday, and while the market is trading positively now. We may see lows down to the $26,000 mark in the coming weeks,” he recently said.
Another bearish factor to consider is a drop in the GBTC premium, which measures the difference between the value of Grayscale Bitcoin Trust’s holdings and the market price of the holdings.
The premium has vanished in recent days, signaling a decline in institutional demand. While retail investors directly buy Bitcoin on the spot market, many institutional investors invest through the Grayscale Bitcoin Trust for regulatory reasons.
Sellers finally secured a daily close below the $32,000 level on Thursday, which accompanied a fall out of a contracting triangle. This indicates the path of least resistance is to the downside.
According to popular crypto trader “Cred,” a move above $35,000 is needed to abort the bearish view. “No clear read from me in these conditions,” he tweeted.
“For longs: i) $ETH needs to meaningfully break ATH. ii) $BTC, which would likely underperform in those circumstances, must reclaim $35000s at least. Absent those setups, just gonna chill and avoid burning through trading fees.”
Despite the latest decline, Bitcoin is still up 6% on a year-to-date basis and up over 35% from the price of $23,000 seen last month. Analysts remain optimistic about the cryptocurrency’s long-term prospects.
As for how low the Bitcoin price may drop in the near term, Ju could see it dipping below $28,000. “I’m not so sure that 28k is the bottom. The latest data says they have been selling BTC, and not enough premium,” he tweeted.