Main Points:
- Bitcoin approaches an all-time high, with market demand surging among both individual and institutional investors.
- OTC desk daily inflows have dropped to their lowest in 2024, despite Bitcoin’s price nearing record highs.
- Institutions and high-net-worth investors use OTC desks to trade large volumes without directly impacting market prices.
- CryptoQuant data indicates that OTC desks currently hold over 400,000 BTC, suggesting strong demand but stable inventory levels.
- The stable OTC reserves highlight a divergence between the trading demand and direct market impact, a phenomenon partly attributed to recent Bitcoin ETF developments.
The Role of OTC Desks in Bitcoin’s Rise
Bitcoin has once again surged close to its all-time high, standing near $72,300 at the time of reporting, only 2% below its record peak of $73,798, achieved in March. October has been a strong month for Bitcoin, showing a 14% increase and marking the highest monthly gain since March. However, as Bitcoin’s price climbs, on-chain data from CryptoQuant shows a decrease in OTC (over-the-counter) desk inflows, reaching their lowest daily volume this year. OTC desks, which allow high-net-worth individuals and institutions to buy large quantities of Bitcoin without impacting the market price, have become crucial in sustaining Bitcoin’s stability in the face of rising demand.
The Decline in OTC Inflows Despite Demand
While Bitcoin’s price continues its upward trajectory, CryptoQuant data indicates that the daily volume of Bitcoin inflows into OTC desks has reached a year-to-date low. Over the past five months, these desks have been crucial in enabling large trades, with a high of over 200,000 BTC traded during this period. Yet, the sudden decline in inflows to these desks suggests a stabilization in institutional demand, even as Bitcoin edges closer to its record high.
Bitcoin ETF and Institutional Influence
The recent introduction and surge in popularity of Bitcoin ETFs have influenced how institutions acquire BTC without directly impacting prices on public exchanges. In a significant development, October 29 marked the highest single-day purchase volume by Bitcoin ETF issuers, though this amounted to only 2% of the holdings managed by OTC desks. In contrast, the first quarter saw daily inflows ranging between 9-12% of OTC desk reserves following SEC approval of Bitcoin ETFs. This change reflects the gradual shift of institutional demand to regulated products, which may have influenced the decrease in direct OTC inflows.
OTC Reserves and Price Stability
The stability of OTC desk reserves in recent months is noteworthy. Since September, the reserve levels have remained steady, with only a 3,000 BTC fluctuation over 30 days, down significantly from June’s high of 92,000 BTC fluctuations. While OTC desk reserves previously showed high volatility due to compounded demand, recent stability may suggest a balanced supply-demand dynamic, which has contributed to Bitcoin’s price resilience.
Implications of Decreasing Daily Inflows
For Bitcoin to sustain its current growth trend and possibly reach new highs, CryptoQuant suggests that daily inflows to OTC desks must remain low. The average OTC reserve level in October was approximately 90,000 BTC, marking a 52% decrease from the reserves held during the year’s initial three quarters. This significant drop reflects a shift in market dynamics: if demand persists with reduced OTC inflows, Bitcoin could continue rising toward uncharted price levels.
Outlook: Bitcoin’s Path Forward Amid Lower OTC Activity
With Bitcoin currently on the cusp of surpassing its all-time high, the role of OTC desks in managing large trades without impacting market prices remains pivotal. As demand surges yet inflows remain low, the upcoming months may witness Bitcoin climbing even further, especially if OTC demand consolidates and ETF-driven investments provide additional price stability.
In summary, Bitcoin’s recent rally has occurred against a backdrop of decreasing OTC desk inflows, reflecting shifts in institutional trading practices and the influence of ETFs. The decrease in OTC activity underscores a balance between demand and available reserves, positioning Bitcoin for continued growth. The evolving relationship between OTC desk dynamics and Bitcoin’s price behavior highlights the potential for future highs, especially if demand remains robust in a market with limited immediate supply.
