- Coinbase Premium rebound signals institutional confidence, as investors buy Bitcoin dips during market fluctuations.
- Negative Coinbase Premium reveals panic selling by retail traders, followed by quick institutional buying to stabilize prices.
- Bitcoin’s recovery highlights the growing influence of institutional investors, helping the crypto asset maintain long-term stability.
The price of Bitcoin has also been seen to recover in recent days due to changes in the market, especially through the Coinbase Premium index. This trading pair that shows the price difference between Bitcoin on Coinbase Pro and Binance is an indicator of institutional investors. In an X post on Tuesday, analytical platform Crypto Quant highlighted that higher Coinbase Premium is usually associated with more aggressive buying pressure from US institutional investors who prefer to trade at Coinbase.
However, the Coinbase Premium went negative in the last few days, which is typical for a panic selling phase, especially by Binance traders who are believed to be more likely to be retail traders. This decline in the premium is generally associated with market stress, as smaller investors are quick to act in response to panic in the market. In the case of the premium turning negative, it indicates that the trading price of Bitcoin on Binance is lower than that on Coinbase due to selling pressure from the retail traders.
Bitcoin Dip Bought by Institutions
Nevertheless, the rebound of Coinbase Premium was quite rapid after Bitcoin saw a major price plunge during the same period. This rebound might imply that the long-term investors based in the US, who are least likely to be impacted by short-term volatility, have probably bought the dips. Such investors are usually value investors and are not affected by market fluctuations, and they usually come in to buy when prices are low due to market fluctuations.
This behaviour is consistent with market norms whereby institutional investors use retail selling pressure as an entry point. This is because when retail investors liquidate their positions, large investors with better resources and planning can buy BTC at a lower price and in the process prop up the value of the cryptocurrency. At the time of writing, BTC is trading at $97,513, with 1.12% loss in the last 24 hours.
Source: TradingView
Institutional Support Drives Bitcoin
The fast bounce back of the Coinbase Premium shows that institutional investors still have confidence in Bitcoin during the period of fluctuation. This buying activity is essential due to the fact that BTC could recover lost grounds very quickly if there are sharp corrections. As long as institutional investors are willing to consider BTC as an asset, they will stay in the market and prevent a deep fall.
The current price action of Bitcoin shows that whilst retail traders can indeed cause short term price fluctuations, institutional investors are now seen as the major players who can influence the long term stability and growth of the market. With BTC being highly sensitive to such institutional actions, the bounce back of Coinbase Premium means that the cryptocurrency is likely to experience further gains as institutional buyers keep on buying the dips and defending the price.