Why Did Bitcoin Plunge? Here’s What On-Chain Data Says
11 March 2023 - 12:00AM
NEWSBTC
Bitcoin has slipped under the $20,000 level today for the first
time in two months. Here’s why this plunge may have taken place,
according to on-chain data. Bitcoin Price Dropped With Coinbase
Premium Turning Negative As pointed out by an analyst in a
CryptoQuant post, the U.S. government’s recent movement may have
played a role in the latest decline in BTC’s price. There are a
couple of relevant indicators here: the Coinbase Premium and the
Spent Output Age Bands (SOAB). The “Coinbase Premium” measures the
difference between the Bitcoin price listed on the cryptocurrency
exchange Coinbase and that listed on Binance. Coinbase is an
exchange that’s popularly used by U.S.-based investors (especially
large institutions), while Binance has a more global-oriented
audience. Due to this reason, the Coinbase Premium can provide
hints about whether American holders are buying (or selling) more
or less than global investors right now. When the value of the
metric is positive, it means the price listed on Coinbase is
greater than that on Binance currently, and hence the U.S.-based
users have been putting on higher buying pressure than the global
investors (or alternatively, they have just been selling less
heavily). On the other hand, negative values of the metric suggest
that U.S. participants might be engaging in a higher amount of
selling than the world user base at the moment. Related Reading:
Bitcoin Miner Reserve Plunges, Bearish Sign For Price? Now, here is
a chart that shows how the Bitcoin Coinbase Premium has changed
over the past week: Looks like the value of the metric has gone
down in recent days | Source: CryptoQuant As displayed in the above
graph, the Bitcoin Coinbase Premium has turned negative recently.
This means that U.S. investors may have been putting some
extraordinary selling pressure on the cryptocurrency during this
period. Interestingly, the price of the coin has declined while the
premium has become negative, which may suggest that U.S.
participants may have had more of a hand in this latest plunge. The
chart also contains data for the other indicator of interest here,
the “SOAB,” which tells us which age bands (or groups) in the
market have been moving their coins recently. Curiously, the 6m-12m
age band, which includes all Bitcoin investors that have been
holding onto their coins for at least 6 months and at most 12
months ago, has shown a large movement just a few days ago. Related
Reading: Bitcoin MVRV Approaches Crucial Retest, Here’s What Can
Happen Next As for the source of these aged coins, the quant
explains, “the transaction is linked to bitcoins seized by the U.S.
government because they are related to Silkroad.” The timing of
this large Bitcoin transaction and the selling pressure rising on
Coinbase is interesting and could suggest that there may be a link
between the two. “It’s difficult to say what impact this
transaction had on the price drop because we can’t see what’s
happening on the exchange,” notes the analyst. “But everything
suggests that it caused extra selling pressure.” BTC Price At the
time of writing, Bitcoin is trading around $19,800, down 11% in the
last week. BTC has plunged over the past day or so | Source: BTCUSD
on TradingView Featured image from Kanchanara on Unsplash.com,
charts from TradingView.com, CryptoQuant.com
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