Bitcoin Finds Support as Coinbase Premium Index Recovers

Bitcoin’s bullish momentum continued over the weekend, with the world’s largest cryptocurrency reaching a high of $98,300 after finding critical support at $91,405. This marks six consecutive days of price gains as demand and supply dynamics drive the market.

Supply and Demand Dynamics

On the supply side, Bitcoin’s mining difficulty and hash rate have surged to record highs since the last halving event in April. This increase has pushed the coin’s inflation rate to just 1.11%, significantly lower than the U.S. Consumer Price Index figure of 2.7%. Notably, Bitcoin’s inflation rate has dropped by 12% compared to 2016. Meanwhile, the amount of Bitcoin held on exchanges continues to decline, suggesting reduced selling pressure.

On the demand side, institutional interest is growing. Exchange-traded funds (ETFs) have amassed over $128 billion in assets, with BlackRock’s IBIT fund accounting for $54 billion. MicroStrategy has also expanded its Bitcoin holdings, now owning over 450,000 coins. Analysts on platforms like Polymarket anticipate that the company’s holdings will exceed 500,000 coins by March.

American Investors and the Coinbase Premium Index

There are clear signs that American investors are increasing their Bitcoin purchases. This is evident from the recovery of the Coinbase Premium Index, which measures purchases by U.S.-based investors and institutions. According to CoinGlass, the index has risen from a December low of -0.24 to -0.021. Additionally, CryptoQuant data reveals that the index has moved above the 14-day Simple Moving Average for the first time in 26 days—a bullish signal for Bitcoin’s price.

As Coinbase remains the most widely used exchange in the U.S., a rising Coinbase Premium Index indicates that significant capital is flowing into Bitcoin from American investors.

Upcoming Catalysts for Bitcoin

Bitcoin’s rally could also be fueled by upcoming fundamental events. President-elect Donald Trump’s inauguration and the anticipated $16 billion FTX fund distributions are expected to act as catalysts. A portion of these funds could be reinvested in Bitcoin and other cryptocurrencies. Furthermore, Bitcoin’s MVRV (Market Value to Realized Value) ratio remains low, suggesting that the asset is undervalued.

Bitcoin Price Analysis

On the daily chart, Bitcoin has shown consistent strength, staying above the 50-day moving average for several days. The $91,400 support level has proven crucial, as the price has repeatedly failed to break below it since December.

If the bullish momentum continues, Bitcoin could target its all-time high of $108,000. A breakout above this level might pave the way for a move toward the 38.2% Fibonacci Retracement level at $114,000. However, there is a risk of forming a head-and-shoulders pattern, which could trigger a bearish breakdown below the $91,400 support.

Bearish Warning from Analyst

Not all analysts share the optimistic outlook. Jacob King of WhaleWire recently issued a bearish warning for Bitcoin and the broader cryptocurrency market. In a social media post, King cited several red flags, including:

• MicroStrategy slowing its Bitcoin purchases.
• El Salvador’s apparent shift away from crypto-focused policies.
• BlackRock reportedly selling significant Bitcoin holdings.
• Tether (USDT) pausing new minting for over 20 days.

King described these developments as “the calm before the storm,” cautioning that a potential crypto downturn could coincide with a broader stock market crash. He urged investors to reassess their risk exposure.

Current Market Status

As of Sunday evening, Bitcoin was trading at $98,035, maintaining its strong upward momentum. While bullish signals dominate the technical landscape, bearish warnings underscore the need for cautious optimism in the current market environment.