A sign of renewed institutional interest?

The Coinbase premium turned positive in early July after the depression in mid-May

According to research from Caico, this may indicate a resurgence of institutional interest in Bitcoin.

A renewed institutional interest

The Coinbase premium, which measures the difference between the hourly bitcoin price of Coinbase's BTC-USD pair and Binance's BTC-USDT pair, is a key indicator of institutional sentiment in the cryptocurrency market.

On July 1, crypto analyst David Launt pointed out that Coinbase's premium has fallen to alarmingly low levels. He recalled a similar event that followed a major crypto rally months after the premium turned negative.

Coinbase premium returns to levels not seen since mid-May pic.twitter.com/kOZxbvM3Wk

— David Launt (@dlawant) July 15, 2024

His analysis suggested that this measure could once again indicate an upcoming market rally. In the year On July 15, the premium rose to a two-month high, reinforcing Lount's bullish outlook.

According to Kaiko, this positive change started in early July. It followed the lowest level seen in late June since the collapse of Terra in 2022. Given that institutional trading volume accounts for over 80% of activity on Coinbase, the premium is often seen as a measure of institutional sentiment.

Historically, Coinbase's premium has been closely tied to major market events. For example, the collapse of Terra and FTX reduced institutional demand for Bitcoin, sending the premium into negative territory. However, the recent positive change in the premium indicates an increase in institutional interest in BTC.

Kaiko recently revealed that Coinbase's premium increase may affect Tether's USDT volatility. This flexibility is in line with the European Union's implementation of the Markets in Crypto-Assets Regulation (MiCA), which imposes stricter requirements on stablecoin issuers.

Tether, which currently does not comply with these regulations, has faced restrictions on major cryptocurrency exchanges for users of the European Economic Area (EEA). Thus, USDT lost ground against the USD in late June but recovered on most exchanges in early July, despite continued struggles on low-liquidity platforms such as Binance.US.

Spot-Driving Rally

Market analyst HornHairs interprets bitcoin's biggest Coinbase premium in two months and says the current rally is mainly driven by spot buying. This suggests that if the rally continues, it will be led by altcoins on the Bitcoin and Ethereum blockchains, giving them prominence as the first and second largest networks in the crypto industry.

Biggest Coinbase premium on $BTC we've seen in two months

Spot led lineup for now 🦍 pic.twitter.com/O1mxINqgsK

— HornHairs 🌊 (@CryptoHornHairs) July 14, 2024

When Bitcoin is trading higher on major US exchanges, it indicates strong buying pressure from US investors. This is particularly noteworthy because on-the-spot rallies appear to be more durable and less risky compared to derivatives-driven products. Spot-driven rallies are considered healthy for the market, providing a more stable foundation for future growth.