Hours before Bitcoin’s (BTC) price experienced a sharp 7% drop to $66,000, the Coinbase Bitcoin Premium Index showed a significant decline, signaling a bearish outlook.
Bitcoin has recently retreated from its all-time highs, descending to prices not observed in the last week and triggering substantial liquidations. This downturn was preceded by a negative signal from the Coinbase Bitcoin Premium Index, as noted by CryptoQuant analysts.
Bearish Indication from Coinbase Premium
The Coinbase Premium Index, which calculates the price difference between Binance’s USDT pair and Coinbase Pro’s USD pair, fell below 0.05 shortly before BTC’s price reduction. This index serves as an indicator of the sentiment among professional traders compared to retail investors, with a drop suggesting a decrease in bullish sentiment among the former.
A downturn in the Coinbase Premium often foretells a potential short-term market correction within an overall bullish trend, hinting at an impending price pullback and sideways movement. It also suggests that a rapid price rise for BTC might not be on the horizon.
The decrease in the premium to below 0.05 highlighted a reduction in buying pressure from US investors, leading to a price correction that analysts viewed as inevitable. Monitoring firms like CryptoQuant and Bitfinex had previously cautioned that BTC was at risk of a correction after surpassing $73,000.
Predicted Correction Ahead
According to a CryptoPotato report, technical analyst CryptoCon predicted that BTC would need to undergo a 20% correction before embarking on a new bullish phase. With signs indicating a potential further 6% decline, BTC is expected to find a bottom in the upcoming days.
Drawing on historical patterns observed in the Directional Movement Index (DMI), CryptoCon anticipates BTC reaching a peak in the next three to nine months following this period of consolidation.
Following Friday’s downturn, the market witnessed the liquidation of over 190,000 traders, amounting to a total of roughly $700 million. The largest single liquidation occurred on the OKX exchange, involving over $13 million. As BTC tries to recover from its slide from highs above $73,000, it might face delays in rebounding due to the high levels of unrealized profit among short-term holders during its rally.