Bitcoin's discount on Coinbase relative to Binance has reached a yearly high. According to U.Today, the gap reflects a freeze on Binance after a hack, not weak U.S. demand. The market now watches how fast the gap closes.
The Coinbase Premium Index collapsed to around −0.06%, putting Bitcoin's discount on Coinbase against Binance at a yearly high. In normal times, a reading like this suggests large U.S. funds are selling crypto. This time, the signal is misleading.
A Binance freeze breaks the arbitrage link
The discount coincided with a hack on October 29–30, when attackers withdrew about $6.3 billion from Binance's hot wallets. Binance froze half of the stolen funds on the blockchain, and the head of the platform promised to cover the remaining client losses from the SAFU reserve fund.
Amid the panic, Bitcoin dropped to $77,000–$78,000.
To contain the problem, Binance banned deposits and withdrawals for a time. As a result, large players could not buy the cheaper Bitcoin on Coinbase and move it to Binance to even out the price. That halt in cross-exchange arbitrage left liquidity locked inside the platforms and widened the discount to its largest level in a year.
What the gap means for U.S. demand
Galaxy Research's head of research, Alex Thorn, noted that the blocked transactions meant the Coinbase discount temporarily stopped signaling weak demand in the U.S.
On November 1, Binance announced a phased reopening of withdrawals, starting with BTC and ETH. If the gap closes in the coming days, the anomaly was purely technical. If the negative spread becomes entrenched, it would be an alarming signal of a real cooling of American capital.
Source: U.Today
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