Bitcoin Traders Growing Cautious
The optimism among professional Bitcoin traders is waning, as indicated by the Coinbase Premium Index. This metric reflects the difference between Coinbase Pro’s USD pair price and Binance’s USDT pair price. The index has been showing a decreasing trend, suggesting that professional traders have become less bullish compared to retail investors. This is significant because a large portion of Coinbase’s trading volume comes from professional traders.
When Bitcoin’s price rises in a market with high open interest and a decreasing Coinbase Premium Index, it often indicates an overheated market.
Bitcoin Still Within Reasonable Valuation
Despite a recent decline after surpassing $44,000, Bitcoin is still far from being considered “overvalued.” The elimination of leveraged long positions in the futures market resulted in significant losses, but on a multi-year view, Bitcoin’s MVRV ratio suggests that it is not overvalued.
In the past, Bitcoin has experienced corrections of over 30% in 2013, 2017, and 2021. According to the Reflexivity report, these corrections are part of Bitcoin’s high volatility nature and do not indicate overheated valuation levels.
“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.”
Hot Take: Bitcoin Traders Show Caution Amidst Uncertainty
The cautious sentiment among professional Bitcoin traders is evident as the Coinbase Premium Index continues to decrease. This shift indicates that professional traders are becoming less optimistic compared to retail investors. However, despite recent price declines, Bitcoin is still considered reasonably valued. Its historical trends and corrections show that it remains far from overheated levels of valuation. As Bitcoin’s volatility persists, it’s important to maintain a long-term perspective and understand the potential for aggressive corrections.
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