Americans Are Bullish on Bitcoin Again. What Coinbase Data Shows.

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Bitcoin prices have already rallied this week.

Jack Guez/AFP via Getty Images

The price of Bitcoin has soared over the past week as investors pile back into beaten-down risk-sensitive assets like cryptos and tech stocks.

Bitcoin was up 7% over the past 24 hours, changing hands around $23,900 on Wednesday, continuing a rally that has carried it almost 25% higher in the past week. Some analysts are calling for gains to the tune of an additional 25% in the days ahead.

They aren’t the only ones bullish on Bitcoin right now. Data from the cryptocurrency exchange Coinbase Global (ticker: COIN) suggest that U.S. investors in particular are hungry for digital assets, a factor that could fuel further gains.

“There are some signs that we could have continuation to the upside, as the Coinbase Premium Gap has surged to positive values over the past week,” Marcus Sotiriou, an analyst at the digital asset broker GlobalBlock, wrote in a research note Tuesday.

The Coinbase Premium Gap, which is tracked by the data firm Crypto Quant, measures the difference between Bitcoin prices quoted on Coinbase and those on Binance, the world’s largest crypto exchange. Since Coinbase is most popular in the U.S., and Binance is an offshore behemoth, the gap can be read as an indicator of how crypto demand among Americans stacks up relative to the rest of the world.

This indicator had been in positive territory for much of the time between September 2020, when the latest Bitcoin bull run picked up speed, and May this year, when the recent selloff sharply accelerated. 

Bitcoin rose from $10,000 in September 2020 to a peak of near $69,000 in November 2021 before prices slowly eroded over the following months. The price of the token took a swan dive in early May, going from $40,000 to $30,000 before falling into the $20,000 range by mid-June.

Since that point in early May, the Coinbase Premium Gap has been firmly negative, signaling a discount for Bitcoin on Coinbase amid a drying up of U.S. demand for the token. As recently as last week, that discount was sitting at $25, but by Tuesday, it was $1.50, just about the closest to break-even—other than a blip in June—since Bitcoin was at $38,500.

“This could be a sign that U.S. investors are buying Bitcoin more than the rest of the world, as Coinbase is mainly used by U.S. investors,” Sotiriou said. “This could also infer that institutions are becoming more aggressive buyers, as Coinbase has a bigger institutional percentage of users compared to Binance. Institutional buy pressure is always a positive sign for bulls.”

All that doesn’t erase Bitcoin’s devastating losses in recent months. The largest digital asset just capped its worst quarter since 2011, the year in which it became worth $1 for the first time. The market capitalization of the crypto space has collapsed to $1.1 trillion from nearly $3 trillion in November 2021 as fear of a recession, other big-picture pressures, and failures in the crypto industry itself have fueled a selloff. 

Some analysts expect more losses—even if prices are staging a rally for now.

Write to Jack Denton at jack.denton@dowjones.com