Why Did Bitcoin Plunge? Here’s What On-Chain Data Says

Keshav Verma

Last Updated: June 11, 2024 9:32 am

3 mins read

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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.

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.

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

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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