The so-called Coinbase Premium index has turned positive for the second time since April of this year amid a cryptocurrency market recovery that has seen the space’s market capitalization briefly surpass the $1 trillion mark, showing $BTC buying pressure is growing.
According to Ki Young Ju, CEO of cryptocurrency analytics firm CryptoQuant, Coinbase’s Bitcoin price premium has risen to near the 0.075 mark, marking its second move into positive territory after briefly spiking to 0.217 on June 30, before slipping back into negative territory. The index is now recovering.
According to CryptoQuant, the Coinbase premium index is an indicator showing the price gap between Coinbase’s BTC/USD trading pair and Binance’s BTC/USDT pair. When the premium is positive, it shows buying pressure on the exchange is heating up.
According to Ki Young Ju, this buying pressure on Coinbase likely comes from institutional investors in the United States. In mid-June, the CEO noted most U.S. institutional investors are using Coinbase, which meant at the time investor sentiment wasn’t high as the Coinbase price premium was negative.
The premium has recovered at a time in which the flagship cryptocurrency has been recovering and briefly traded above $22,000, up from an $18,500 low seen last month. Bitcoin posted its worst quarterly performance in more than a decade, as in the second quarter of this year it lost around 58% of its value, going from $45,524 to just under $19,000 at the end of the three-month period.
The cryptocurrency space’s ongoing bear market came amid a risk-off sentiment in the markets driven by inflation fears, interest rate hikes, and the war in Ukraine.
Cryptocurrency prices plunging also revealed several firms in the space were highly leveraged. In May, TerraUSD ($UST), an algorithmic stablecoin in the Terra network, collapsed along with its sister token LUNA, wiping billions from the market.
In June, embattled crypto lending firm Celsius Network froze withdrawals for customers over “extreme market conditions,” with rival lender Babel Finance and crypto exchange CoinFLEX freezing withdrawals shortly after.
Moreover, crypto hedge fund Three Arrows Capital has entered liquidation following a court order issued in the British Virgin Islands after creditors sued the fund for its inability to repay debts. Several lends suffered losses on loans provided to the hedge fund.
The cryptocurrency market downturn has forced some companies to lay off part of their staff, including Coinbase and BlockFi. Sam Bankman-Fried’s Alameda Research has stepped in to halt contagion with credit lines for BlockFi and crypto broker Voyager Digital.
According to the latest edition of CryptoCompare Research’s “Digital Asset Management Review“, in June, one Bitcoin ETP’s assets under management (AUM) managed to hit an all-time high despite the current crypto bear market.
The 21Shares Short Bitcoin ETP (SBTC), which “seeks to provide a -1x return on the performance of Bitcoin for a single day,” saw a 30-day return of 30.8% according to CryptoCompare, making it the third consecutive month where the product’s assets under management have risen, recording a new $16.5 million all-time high this month.