Coinbase Premium can be used to determine the sentiment among institutional and retail traders from the U.S. as it reflects the discount or premium on the Coinbase Pro trading platform mostly used by large crypto investors.
During the crypto crash, the metric showed one of the strongest dips in its history, suggesting that market makers on Coinbase were struggling to find enough liquidity on the market, which caused a large discount.
Coinbase $BTC price premium seems to be recovering.https://t.co/Xkoohe4Ozc https://t.co/ZEorApSlTT pic.twitter.com/SDEIn1IkPz— Ki Young Ju (@ki_young_ju) July 8, 2022
Since Coinbase Pro is mostly used by large investors, their average order size is significantly greater than the average order you see in a centralized exchange. To avoid unlikely volatility on the market, market makers inject more liquidity on the market prior to completing an order.
The metric's recovery is a direct sign of returning buying power on the market and whales' accumulation. With the rise of the buy volume on the market, traders and investors are pushing the premium higher.
We are already seeing the effect of returning buying volume on the market as Bitcoin has finally broken through the consolidation channel that has been forming since June 19. Unfortunately, BTC retraced after reaching the $22,000 price range.
Bitcoin feels relief
One of the main sources of selling pressure on the first cryptocurrency could be gone from the market as the largest cryptocurrency miners announced that they have successfully realized most of the funds they used for stabilizing their operations.
Another source of pressure is the U.S. Dollar's rally that suppresses almost every financial asset on both cryptocurrency and traditional markets.
At press time, Bitcoin is moving in the $21,000-$22,000 trading range and changing hands at $21,788.