Coinbase Premium Index has shown that American Bitcoin buyers are in the sideline ahead of the US CPI data release.
By Godfrey Benjamin
Edited by Julia Sakovich
Updated
3 mins read
The Bitcoin Coinbase Premium Index, a metric used to gauge Bitcoin BTC $84 062 24h volatility: 0.8% Market cap: $1.67 T Vol. 24h: $30.44 B retail demand in the US, fell to its lowest in six months. This shift comes ahead of Wednesday’s US Consumer Price Index (CPI) release, suggesting cautiousness among investors.
According to CoinGlass data, the Bitcoin Coinbase Premium turned negative on Tuesday to -0.0254%. On the same day, Bitcoin briefly dropped to $95,902. This has raised concerns among investors as it is the first time the index has flipped negative since it crashed on August 3.
Notably, the Coinbase Premium Index measures the percentage difference between the price of Bitcoin on the American exchange and rival platforms like Binance. The index is usually used to determine the demand of US institutional investors.
A positive reading suggests institutions actively seek to acquire Bitcoin, while a negative value hints at selling pressure. Accordingly, market analysts view the recent Coinbase Premium crash as a sign that US Bitcoin institutional investors have become cautious ahead of the upcoming CPI data.
Meanwhile, Bitcoin investors abroad have led the coin’s recovery to $96,000 from overnight lows near $94,900. At the time of writing, the coin was changing hands for $96,061, down 2.03% in 24 hours.
Historically, a positive Coinbase Premium precedes bullish Bitcoin prices, indicating strong leadership from US investors. For instance, Bitcoin rose to an all-time high above $70,000 when Coinbase Premium soared to two-month highs in early November.
With the recent decline, investors and traders are watching to see the impact on Bitcoin’s future movement. As of this writing, BTC is traded at $96,330, down 1.9% in the last 24 hours, according to data from CoinMarketCap. The market cap is pegged at $1.9 trillion, while the daily trading volume has jumped over 9% to $36.79 billion.
The CPI is a key indicator of inflation and changes in purchasing trends. A higher CPI indicates higher inflation, while a falling CPI indicates lower inflation.
The December 2024 CPI report showed that inflation increased to 2.9% Year-over-Year (YoY). At the same time, the core rate dropped to 3.2%. There are several predictions that Wednesday’s report will reveal CPI at 2.85%, representing a modest 0.5% drop from December’s figure. The market also forecasts that the core rate will drop to 3.13%.
A softer-than-expected CPI could reinforce hopes for the Federal Reserve (Fed) to ease up on interest rate cuts. This scenario might weaken the US dollar, potentially boosting demand for risky assets like Bitcoin.
On the other hand, a hotter-than-expected outcome could lift the US dollar broadly, weakening demand for Bitcoin.
It is important to note that forward-looking inflation indicators hint at higher future inflation. This has dampened hopes for sustained aggressive rate cuts by the Fed. As a result, it complicates the Fed’s path to lowering rates and suggests that any CPI-induced rally in Bitcoin might be short-lived.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.
