This Happened on Coinbase’s Bitcoin Premium Index Before BTC Plunged to $66K
In the past few days, Bitcoin (BTC) has fallen from its newly recorded highs to levels not seen in a week, triggering millions in liquidations. Analysts have revealed that the Coinbase Bitcoin Premium Index flashed a bearish signal before BTC slumped.
According to an analysis by CryptoQuant, the Coinbase Premium Index dipped below 0.05 some hours before the price of BTC fell more than 7% to $66,000 on Friday and even further on Sunday.
Coinbase Premium Flashes Bearish Signal
The Coinbase Premium Index is a metric that represents the percentage difference between Binance’s (Tether) USDT pair price and Coinbase Pro’s USD pair price. A decrease in the index indicates that professional traders are less bullish than their retail counterparts, as a larger portion of Coinbase’s trading volume comes from the first investor cohort.
A negative trend in the Coinbase Premium Index usually signals a short-term correction within a bullish market, amplifying the likelihood of a pullback and eastside movement in the near term. This also indicates that BTC is unlikely to witness an immediate price increase.
The premium’s fall below 0.05 underscored a period of weakened buying pressure from United States investors. The price correction that followed was one analysts deemed necessary. On-chain analysis platforms like CryptoQuant and Bitfinex also warned that BTC faced the risk of a price correction during its ascent above $73,000.
A Necessary Correction
CryptoPotato reported that popular technical analyst CryptoCon said a 20% price correction is necessary for BTC before the asset takes off to new levels. As there are warning signs BTC could go lower, the asset may lose roughly 6% more of its value in the coming days.
CryptoCon expects BTC to reach a cycle top in the coming three to nine months after the current cooling period, per historical data from the Directional Movement Index (DMI), an indicator that measures an asset’s strength and direction while diminishing potential false signals.
Meanwhile, Bitcoin’s plunge on Friday liquidated over 190,000 traders with a total value of approximately $700 million. The single-largest wrecked position was more than $13 million on the crypto exchange OKX. It may take a while before the leading digital asset recovers as short-term holders’ unrealized profit margins reached extremely high levels during BTC’s rally past $73,000.
The post This Happened on Coinbase’s Bitcoin Premium Index Before BTC Plunged to $66K appeared first on CryptoPotato.
