As of late October 2023, Bitcoin (BTC) has been riding a wave of positive sentiment, inching closer to its all-time high of $73,750. On October 29, Bitcoin was just a few hundred dollars away from this significant milestone, trading at around $72,200. This proximity to its peak has generated excitement among crypto investors who eagerly expect new record highs in the near future. However, following this impressive rally, Bitcoin experienced a minor correction, which has raised questions about its sustainability and the factors influencing its price direction.
A key aspect influencing Bitcoin’s current trajectory is its over-the-counter (OTC) availability. Recent insights from analysts at CryptoQuant have shed light on how these operations play a pivotal role in Bitcoin’s price movements. The surge in interest around Bitcoin, particularly from the United States exchange-traded funds (ETFs), acts as a driving force behind its increasing value. Reportedly, Bitcoin purchases from ETFs skyrocketed from a daily volume of 1,300 BTC at the start of the month to an impressive 5,800 BTC by October 29. On October 13, the demand reached a peak, with ETFs recording their largest daily purchase of 7,700 BTC.
Despite this upward trend in ETF activity, there are signs that current purchase volumes fall short of historical highs. For context, during the peak months of February and March, daily purchases surged to highs of 16,000 BTC. This discrepancy prompts concerns among investors about whether Bitcoin can enough support to break through its previous all-time high. The discrepancy in volumes suggests that although interest is growing, it may not be sufficient to push the cryptocurrency into new territory imminently.
The balance of Bitcoin available on OTC desks has experienced a notable transformation throughout 2023. In the first quarter of 2024, Bitcoin’s balance on these desks entered negative territory, a period characterized by decreasing availability contributing to price surges. However, the present scenario contrasts sharply; currently, the availability of Bitcoin on OTC desks has significantly increased, climbing from a range of 183,000-193,000 BTC in Q1 to approximately 416,000 BTC at present.
This rising availability has implications for how ETF purchases fit into the larger picture of Bitcoin’s demand and supply dynamics. The current daily ETF purchases now represent only 1% to 2% of the total Bitcoin balance on OTC desks. This is in stark contrast to earlier in the year when ETF purchases accounted for a notable 9% to 12% of the balance. This diminishing share raises the issue of whether the current ETF demand is substantial enough to absorb the increasing supply from OTC desks or if it might exacerbate the challenge for Bitcoin prices to reach new highs.
To navigate the complexities of Bitcoin’s future, it is essential to understand the relationship between ETF demand and OTC desk balances. Analysts from CryptoQuant underscored the critical need for higher ETF purchases to reduce the Bitcoin inventory on OTC desks. The balance on these desks has been stabilizing, and inflows have decreased significantly—from 77,000 BTC in August to only 3,000 BTC monthly growth observed more recently. As prices tend to increase when balances on OTC desks are negative, there lies a potential path forward: a rise in ETF demand correlating with reduced inflows into OTC desks could lead to significant upward price movement for Bitcoin.
While Bitcoin is on the verge of possibly reaching new heights, a careful examination of the interplay between ETF demand and OTC availability will be critical for investors. The current dynamics suggest that while excitement thrives, real challenges must be addressed to establish a sustainable price trajectory in the future.
Leave a Reply