Coinbase saw a sharp surge in buyer activity overnight as the price of Bitcoin (BTC) topped $ 32,500 on Jan. 2. According to analysts, the trend was reminiscent of MicroStrategy’s bitcoin accumulation, which may have been fueled by institutional buy orders. As a result, BTC topped $ 31,000 and hit a new all-time high.
BTC / USD daily candle chart (Coinbase). Source: trade view
Coinbase buyers were the catalyst for the Bitcoin rally
Over the past 48 hours, Coinbase has consistently seen a high premium compared to Binance. At one point, Bitcoin was $ 100 more expensive on the exchange than it was on Binance.
When the price of Bitcoin exceeded $ 30,000, the premium hit $ 350. For example, when Bitcoin was trading at $ 30,000 on Binance, the price of BTC on Coinbase was $ 30,350.
Prior to the rally, CryptoQuant CEO Ki Young Ju said that low Coinbase outflows were a risk to Bitcoin’s rally. He said that drains would need to increase for BTC to find fresh momentum, which it did. He said before the rally:
“We haven’t had any significant Coinbase outflows since USD 23,000, the tokens transferred are decreasing and the fund flow ratio for all exchanges is increasing. It is still possible for institutional investors to join soon, but we could face a correction if this continues. “
As Bitcoin neared $ 29,500, Coinbase outflows began to increase. Ki said they were potential over-the-counter (OTC) trades that are typically bullish for BTC and that illustrate a broader trend towards the decline in BTC reserves on the exchanges.
While we were pumping, another 34K BTC was casually taken from the exchange in the last few blocks. Pic.twitter.com/8r20JnOGaj
– // Bitcoin ack (@BTC_JackSparrow) January 2, 2021
Wealthy buyers use the OTC market to buy or sell large amounts of Bitcoin. When the signs of OTC deals surfaced, Ki said this was positive for BTC. Just two days after the outflow increased, BTC surged above $ 30,000 to hit $ 31,400. Ki noted before BTC broke $ 30,000:
“$ 12,063 BTC just flowed out of #Coinbase. It was about several cold wallets. Possibly OTC offers. Breaking 30,000 will be difficult, but the institutions don’t care. You just buy it more. “Coinbase outflows. Source: CryptoQuant
Why is BTC becoming so attractive?
According to Ashwath Balakrishnan, an analyst at Delphi Digital, Bitcoin got more convincing as it topped its all-time high.
When the price of Bitcoin was around $ 4,000, the risk of a significant downtrend was high, combined with high uncertainty about the medium-term outlook for BTC.
As Bitcoin surged above $ 20,000, the predominant cryptocurrency became more attractive to investors. He said:
“Buying BTC after ATH is actually better than cutting the bottom off a risk-adjusted lens. If you bought at $ 20,000 you were up 50% with minimal friction between buyers from the bottom up was much higher. “
In the short term, one popular narrative that could drive Bitcoin price up is the prediction that institutes may not have bought BTC in December due to possible accounting issues.
Some analysts therefore say that more institutions could get into Bitcoin in the first quarter of 2021. If this happens, as evidenced by Grayscale’s assets under management and the open interest of the CME Bitcoin futures market, it would likely result in a wider BTC rally.