Market X-Ray: Dip buyers save the day once again as Coinbase premium rockets

Hi Frens — Cole here.

Despite clearly becoming a maturing market, crypto is as volatile as ever, with Bitcoin experiencing multiple 10% intraday movements throughout the past several days as bears tried to gain an edge over its buyers.

Fear seemed to reach a boiling point on social media yesterday, with many popular traders calling for a deeper retrace due to the “2017 vibes” that the latest drawback was giving to investors.

However, large spot buys on Coinbase rescued the cryptocurrency from seeing a further drawback, with it now navigating back up towards $50,000.

A few key trends to take note of that may shed some light on the sustainability of this movement, which I will detail further below.

Ah, and the obligatory shill: if you want access to the exclusive interviews with top traders and industry executives, our research about DeFi and crypto trends, and the additional DeFi letter, you will need to subscribe. But have no fear, it’s only $14.99 a month, or $139.99 a year. Get yourself a belated holiday present and subscribe to Alpha Alarm today.

It’s literally the cost of one Uniswap trade a month or a few Starbucks coffees - it’s cheap.

We’re going to release an exclusive interview with a leading Bitcoin on-chain analyst this upcoming week. You don’t want to miss out on this interview.

Bitcoin Plunge Turns Funding Negative, Sparks Spot Buying Frenzy

Before the dip below $50,000 that took place this past week, Bitcoin had seen massive funding rates (at certain times reaching 200%+ annualized) that naturally proved to be unsustainable.

This led to a cascade of liquidations on the way down that magnified the intensity of the drop, which led Bitcoin from highs of nearly $60,000 to lows of $43,000.

However, funding rates were deeply negative (meaning demand for short positions was greater than demand for long positions), and a flurry of spot buying activity helped catalyze a strong rebound.

Bitcoin is now navigating back towards $50,000 and is showing signs of strength as its growth continues being led by spot-buying pressure.

The Coinbase Premium Returns!

After being gone for quite some time, the price premium for spot BTC on Coinbase has once again returned, signaling that demand for spot coins on the exchange is surging.

Although not conclusive, this is often a sign of a TWAP engine from a large buyer being activated, firing off frequent buy orders that absorb selling pressure and lead the price on the exchange to trail higher than that on other platforms.

One analyst pointed out that the Coinbase premium has frequently been above $200 over the past 12 hours — a bullish sign indeed.

“Coinbase Premium is through the roof again. $200 above Binance Bitcoin price. Somebody is going hard on BTC there.”

In the past, periods with BTC seeing high premiums on Coinbase have been followed by strong short and mid-term uptrends, which could mean that a break back above $50,000 is in the cards in the coming days.

Corporate Buying Continues

Bitcoin bears seem to forget that large corporations, whose capital reserves far outmatch retail sellers, continue scaling into Bitcoin positions.

A couple of weeks ago, Square deployed $170m into BTC in the lower-$50,000 region, which was news that retail investors widely overlooked.

MicroStrategy deployed another $15m to buy the dip during the latest drawback, purchasing 328 Bitcoin at an average price of $45,710.

The company’s CEO spoke about this in a tweet:

The market’s pricing dynamics seem to be a bit different now that larger players are involved, and we may not see the same type of 50%+ pullbacks that were frequent during the 2017 uptrend.

Furthermore, selling pressure from miners remains tempered, which could indicate that it’s clear skies for the markets to see further mid-term growth.

There’s not too much else going on right now on-chain, and it does seem like the price action is being mainly driven by order flows and the growing corporate adoption trend.

About Us:

Joseph Young is a cryptocurrency analyst who has been in the space since 2014. He contributes to Forbes, CoinTelegraph, and a host of other top crypto news sites. Over his 6+ years in the space, he has built countless connections with industry leaders and has amassed over 120,000 followers on Twitter.

Nick Chong is a passionate crypto researcher specializing in identifying and extracting conclusions from trends within the rapidly emerging DeFi-space. He has been involved in the crypto markets since 2016, and sources deals for Parafi.

Cole Petersen first learned about Bitcoin in 2013 and began working in the space in 2017. While on a gap year as a student at the University of California, Irvine, he now leads LINKPAD, a venture capital fund, and previously worked as an associate at BlockVenture.

Pepe of the Day:

Pepe the Frog has become the unofficial mascot of the crypto markets, so we feel it is only fitting to add a “Pepe of the Day” section highlighting only the finest and rarest Pepes.

Today’s featured Pepe: “Salute to the bulls.”