As of late October 2023, Bitcoin (BTC) is enjoying an upsurge, nearing its historic peak of $73,750—a level that has generated considerable anticipation among investors and market analysts alike. On October 29, Bitcoin’s value approached this all-time high, only to witness a slight pullback, stabilizing around $72,200. This momentary dip has not dampened the overall bullish sentiment surrounding the cryptocurrency market; instead, it has led to deeper examinations of the underlying factors influencing Bitcoin’s price movements.
Market participants are particularly intrigued by the correlation between Bitcoin’s price trajectory and the increasing activity in over-the-counter (OTC) trading. The importance of such platforms in facilitating large transactions without impacting the market price has become a focal point for analysts. Their insights, especially from firms like CryptoQuant, provide a nuanced outlook on Bitcoin’s current and future price behavior.
A significant driver behind Bitcoin’s current bullish momentum is the surge in net purchases linked to United States spot ETFs. In early October, daily transactions hovered around 1,300 BTC. By the end of the month, this figure had ballooned to an impressive 5,800 BTC, with a peak daily purchase of 7,700 BTC observed on October 13. While these numbers signify robust demand, they still remain below the extraordinary levels seen in the earlier part of the year, specifically February and March, when daily purchases reached impressively high figures of 16,000 BTC.
This comparison raises questions about the sustainability of Bitcoin’s ascent, given that the latest purchasing trends have not yet matched past highs. Market sentiment might be cautiously optimistic, but ongoing concerns linger as to whether the current demand can propel Bitcoin past its previous records if purchase volumes do not continue to increase.
OTC Markets: Structure and Influence
The landscape of Bitcoin available on OTC platforms has shifted dramatically in recent months. Currently, there are approximately 416,000 BTC held on these desks, a stark contrast to the significantly lower figures from the beginning of 2023, which were between 183,000 and 193,000 BTC. Such an increase indicates that more Bitcoin is available for large-scale trading, yet this abundant liquidity could also complicate price movements.
In the present context, daily ETF purchases only represent a meager 1% to 2% of the total BTC balance held on OTC desks. For reference, during the first quarter of the year, that share was considerably higher, fluctuating between 9% and 12%. This decline in the ratio suggests that while the total volume of Bitcoin transactions may be rising, the proportion of Bitcoin being absorbed by ETF purchases is diminishing. As daily purchases decline relative to the total supply, the impetus to push Bitcoin to new heights may be weakened unless ETF demand rallies.
Looking ahead, the critical question remains: What conditions need to be met for Bitcoin to achieve new all-time highs? Analysts emphasize that a sustained increase in ETF demand is paramount for reducing the inventory available on OTC desks. Since Bitcoin typically rallies when these balances are in negative territory, a decrease in inflows combined with increased ETF activity could create the momentum needed for a price breakout.
Conversely, the recent slowdown in the rate of growth for Bitcoin on OTC desks—now at just 3,000 BTC monthly compared to the significantly higher figures of 77,000 BTC and 92,000 BTC seen in August and June—indicates a potential market shift. The balance of BTC available for institutional traders has stabilized, suggesting that significant changes may be necessary for a price surge.
While Bitcoin’s close approach to its all-time high stimulates excitement, a careful analysis of the wires connecting OTC trading dynamics and ETF demand reveals a more complex picture. For Bitcoin to not just hover near but surpass its previous records, a collaborative rise in purchase volumes and a reduction in the available inventory on OTC desks will be pivotal. The coming months will prove essential in determining whether these conditions can be met, thus shaping the future of this leading cryptocurrency.