The Coinbase Premium Index — a metric used to assess retail Bitcoin demand in the U.S. — has dropped to a 12-month low as 2024 draws to a close, with an analyst warning this could pose a challenge to short-term price recovery.
Burakkesmeci, a CryptoQuant contributor, noted in an analysis on December 31: "Increasing selling pressure in the U.S. market has significantly impacted the Coinbase Premium Index, pulling it down to a new low".
Low Liquidation Market
The Coinbase Premium can be used as a way to gauge Bitcoin demand from U.S. retail investors. A positive value indicates more buying pressure, while a negative value indicates selling pressure.
On December 31, the index dropped to a low of -0.23. On the same day, Bitcoin fell to $91,479 on December 31, the lowest level since November 27. Burakkesmeci attributed this to "low liquidation market at the end of the year".
The last time Bitcoin reached this level was in January 2024, coinciding with the launch of spot Bitcoin ETFs in the U.S.
Bitcoin price came close to this level again just before the U.S. election in late October, touching -0.20 when Bitcoin was trading around $68,165, according to CoinMarketCap.
Burakkesmeci said this could pose a challenge to Bitcoin's short-term price recovery unless there is a "change in macroeconomic conditions" or an increase in interest from institutional or retail buyers.
A key macroeconomic event the crypto industry is closely watching is the inauguration of President-elect Donald Trump on January 20.
Some analysts believe Bitcoin's final price surge will continue after the inauguration after an initial lull. According to Ryan Lee, lead analyst at Bitget Research, BTC price could be adjusted up to 30% before continuing its upward trend.
Long-Term Holders Enjoy Significant Profits
Meanwhile, long-term Bitcoin holders — those who have held Bitcoin for more than 155 days — are enjoying significant profits.
This could increase the risk of further sell-offs as investors may want to sell and lock in gains for the new year.
According to data from Bitbo, the realized price for long-term holders is $24,298, corresponding to a profit margin of around 290% if they sell at the current price of $94,820.
However, the average cost basis for short-term (under 155 days) Bitcoin holders is significantly higher.
The realized price for short-term holders is $86,753, reflecting a 9.29% profit if they sell at the current price at the time of writing.
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