After posting remarkable gains, Bitcoin entered a new week on shaky ground as sell-offs hint at a shift in sentiment. The traders are currently on edge amid a pause in the once-continuous upward trajectory of its prices.
The latest data suggest that professional traders have turned cautious amidst uncertainty in Bitcoin’s price.
The bullish sentiment of professional Bitcoin traders is slowly diminishing. The Coinbase Premium Index, a metric reflecting the percentage difference between Coinbase Pro’s USD pair price and Binance’s USDT pair price, is signaling this shift.
According to CryptoQuant’s latest analysis, the Coinbase Premium Index represents the percentage difference between Coinbase Pro’s USD pair price and Binance’s USDT pair price.
A decreasing trend in the index is indicative of the fact that professional traders are demonstrating less bullish sentiment compared to their retail counterparts, considering a significant portion of Coinbase’s trading volume comes from such investors.
Hence, when Bitcoin’s price is increasing in a market with elevated open interest and a decreasing Coinbase Premium Index, it often indicates an overheated market.
Bitcoin experienced a significant decline after surpassing the $44,000 mark. This sudden downturn led to the elimination of hundreds of millions in open interest, indicating the swift liquidation of leveraged long positions in the futures market.
Despite this, MVRV shows that on a multi-year view, Bitcoin is still far from “overvalued” territory.
Throughout its multi-year price trends, Bitcoin has historically encountered various corrections of over 30% in 2013, 2017, and 2021. As such, the recent Reflexivity report noted that flagship crypto asset remains far from overheated levels of valuation that marked cyclical peaks in those three years.
“zooming out we can see that Bitcoin remains far from overheated levels of valuation that marked cyclical peaks in 2013, 2017, and 2021. It’s worth maintaining this perspective while also understanding Bitcoin’s tendency for high volatility which includes aggressive corrections.”