Bitcoin Breaks $85K Barrier, But Coinbase Premium Index Remains Negative

Bitcoin's price briefly broke through the $85,200 barrier for the first time in over eight months on September 21. However, the Coinbase Premium Index, a key indicator of U.S. spot demand, slipped back below zero.

The index measures the difference between Bitcoin's price on Coinbase and Binance, with a negative reading indicating that U.S. buyers are paying less than the rest of the world. This has been the default setting for most of 2023, with the premium spending 50 consecutive days in negative territory in July.

Cryptoquant noted that while the reading is slightly less negative than it was last week, a sustained positive premium is still needed to make the current rally more convincing. The firm also pointed out that derivatives volume has been running at four to seven times spot volume, suggesting that leverage and short squeezes are driving the price up.

The $260 million in shorts liquidated within 60 minutes as Bitcoin cleared $84,000 fits this story, with prices jumping without any new long-term buyers showing up. Cryptoquant had flagged a similar split earlier, with a negative premium alongside a taker buy/sell ratio of 1.12, which signals aggressive leveraged buying.