- Coinbase Premium Index hits a one-year low, signaling a lack of institutional demand.
- Institutional demand for Bitcoin drops, leading to increased selling pressure.
- US investors are cautious, avoiding large BTC acquisitions due to macroeconomic uncertainty.
The Coinbase Premium Index has been sliding to its lowest in the past year, and this affects the price of Bitcoin. On Thursday, CryptoQuant analyst Burak Kesmeci posted an X on the crypto market and explained that on October 25, 2024, the index fell to -0.200 due to uncertainty around the U.S. elections. The situation was rather simple, and the index decreased to -0.237 on December 31, 2024.
Lack of Institutional Demand
A fall in the Coinbase Premium Index implies no institutional buying pressure for Bitcoin. The index captures the price divergence between Bitcoin on Coinbase and other exchanges. A drop means institutional investors are not buying as much of Bitcoin as they were at the current price level. This lack of demand and low liquidity environment has also helped put more pressure on the price of Bitcoin.
According to the analyst, Bitcoin plunged to $91,500 during the low-liquidity period towards the end of the year. The selling pressure in the U.S. market influenced the Coinbase Premium Index to reach new lows. These factors made the market highly subject to price swings, and specifically, the US market felt the most selling pressure.
Cautious US Investors Approach
The low Coinbase Premium Index also suggests that US investors are being careful. Most are still hesitant to make large acquisitions in Bitcoin due to the macroeconomic environment. Investors are careful when it comes to the risks in the market, particularly in light of the current political activities in the United States. This has given buyers a rather cautious approach to making big investments.
Metaplanet CEO Predicts Bitcoin Surge to $200,000 by 2025However, the long-term outlook remains positive, supported by global economic conditions and regulatory developments. In the short term, it is quite possible that Bitcoin may recover due to the change in market sentiment. However, investors will have to wait for the next few months to see whether Bitcoin can start the uptrend again or if the downward pressure will persist.
