As a seasoned crypto investor with over five years of experience in the market, I’ve learned that keeping a close eye on key indicators like the Coinbase premium can offer valuable insights into institutional sentiment and potential market trends.


In the beginning of July, the extra cost to buy cryptocurrencies on Coinbase shifted from a negative to a positive figure, signaling a relief in market concerns that had arisen during the mid-May price drop.

Based on recent findings by Kaiko, I believe this trend may indicate a revival of institutional investment in Bitcoin.

Renewed Institutional Interest

The Coinbase price spread, representing the gap between Bitcoin’s hourly rates on Coinbase’s BTC-USD exchange and Binance‘s BTC-USDT platform, serves as a significant gauge for assessing institutional investors’ attitude towards the crypto market.

On July 1st, cryptocurrency analyst David Lawant noted that the Coinbase buying premium – the difference between the price of cryptocurrencies on the exchange and their market value – had dropped to concerning levels. He reminded readers of a previous instance where a significant crypto rally ensued several months after the premium had dipped into the negative territory.

Coinbase premium returned to a level not seen since mid-May

— David Lawant (@dlawant) July 15, 2024

Based on his examination, it appeared that this indicator might indicate another market upturn. By the 15th of July, its value had climbed to a level not seen since May, providing further evidence for Lawant’s optimistic perspective.

Based on Kaiko’s information, there was a noticeable improvement in early July, which came after hitting its lowest point since the Terra collapse in June 2022. Since more than 80% of trading volume on Coinbase comes from institutions, this premium is frequently interpreted as an indicator of institutional sentiment.

Historically, the Coinbase price spread for Bitcoin has been influenced by significant market occurrences. For example, the failures of Terra and FTX decreased institutional appetite for Bitcoin, resulting in a negative premium. However, the recent upward trend in the premium indicates growing institutional investment in Bitcoin.

Kaiko pointed out that the surge in Coinbase’s price spread might be linked to the heightened instability of Tether’s USDT. This volatility emerged around the same time as the European Union’s introduction of MiCA regulation, placing rigorous conditions on stablecoin creators.

Tether, which is not in line with European Economic Area (EEA) regulations at present, encountered limitations for users in this region from prominent cryptocurrency trading platforms. As a result, the value of USDT deviated from the US dollar starting late June on many exchanges. However, USDT regained its parity with the USD by early July on most widely used platforms, albeit continuing to face challenges on less liquid markets such as Binance.US.

Spot-Driven Rally

Market analyst HornHairs explains that the largest price gap between bitcoin’s market value on Coinbase and its value on other exchanges in the past two months indicates a surge in demand for buying bitcoin directly from Coinbase. This trend implies that the current rally might primarily be fueled by investors purchasing bitcoin at its spot price. As a result, if this upward trend continues, it’s likely that altcoins within the Bitcoin and Ethereum networks will take the lead due to their significant influence in the crypto industry as the first and second-largest blockchains.

Largest Coinbase premium on $BTC we’ve seen in two months
Spot led rally for now
— HornHairs (@CryptoHornHairs) July 14, 2024

As a crypto investor, I believe that when the price of bitcoin is higher on major U.S. exchanges compared to other platforms, it’s a sign of strong buying demand from American investors. This is an important observation because rallies fueled by the spot market are generally more robust and less risky than those driven by speculative derivatives. The stability of the spot market lays a solid foundation for future growth in the crypto space.

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2024-07-23 18:53