A sign of renewed institutional interest?

Coinbase’s premium turned positive in early July after a period of concern following a drop in mid-May

According to Kaiko’s research, this could indicate a resurgence of institutional interest in Bitcoin.

Renewed institutional interest

The Coinbase premium, which measures the difference between hourly bitcoin prices on Coinbase’s BTC-USD pair and Binance’s BTC-USDT pair, is a key indicator of institutional sentiment in the cryptocurrency market.

On July 1, crypto analyst David Lawant noted that Coinbase’s premium had fallen to worrying lows. He recalled a similar event where a major crypto rally occurred months after the premium had turned negative.

Coinbase premium returned to a level not seen since mid-May https://t.co/OLAYBUx8TD pic.twitter.com/kOZxbvM3Wk

— David Lawant (@dlawant) July 15, 2024

Their analysis suggested that this metric could once again indicate an upcoming market rally. On July 15, the premium rose to a two-month high, bolstering Lawant’s bullish outlook.

According to Kaiko, this positive turn in early July followed its lowest level since the 2022 Earth collapse witnessed at the end of June. Since institutional trading volume accounts for more than 80% of activity on Coinbase, the premium is often considered a measure of institutional sentiment.

Coinbase’s premium has historically been closely linked to major market events. For example, the collapses of Terra and FTX significantly reduced institutional demand for Bitcoin, sending the premium into negative territory. However, the recent positive shift in the premium suggests increased institutional interest in BTC.

Kaiko also noted that the recent increase in Coinbase’s premium may have been influenced by the increased volatility of Tether’s USDT. This volatility coincided with the European Union’s implementation of the Markets in Crypto-Assets (MiCA) Regulation, which imposed strict requirements on stablecoin issuers.

Tether, which currently does not comply with these regulations, faced restrictions for users in the European Economic Area (EEA) by major cryptocurrency exchanges. As a result, USDT lost its peg to the USD in late June, but managed to recover in early July on most exchanges despite continued struggles on less liquid platforms like Binance.US.

Rally driven by points

Market analyst HornHairs interprets the largest Coinbase premium in bitcoin in two months as a sign that the current recovery is driven primarily by spot buying. This suggests that concentration, if sustained, will be led by altcoins within the Bitcoin and Ethereum blockchains, given their prominence as the first and second largest networks in the crypto industry.

Biggest Coinbase Premium $BTC we saw in two months

Demonstration led by moment points 🦍 pic.twitter.com/O1mxINqgsK

— HornHairs 🌊 (@CryptoHornHairs) July 14, 2024

When bitcoin commands a higher price on the largest US exchange, it indicates significant buying pressure from US investors. This is particularly noteworthy because rallies driven by points are usually considered more sustainable and less risky compared to those driven by speculative derivatives. Local rallies are considered healthier for the market, providing a more stable foundation for future growth.

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