Impact of Bitcoin Over-the-Counter Availability on BTC Price: Insights from CryptoQuant
Bitcoin (BTC) is currently experiencing a significant upward trend, nearing its all-time high of $73,750. On October 29, the leading cryptocurrency came within a few hundred dollars of surpassing this milestone but faced a slight correction, trading at approximately $72,200.
As cryptocurrency enthusiasts eagerly await a potential new high, analysts from CryptoQuant have shed light on how the availability of Bitcoin in over-the-counter (OTC) markets could influence its price in the near future.
According to a recent report by CryptoQuant, the recent rally in Bitcoin's price can be attributed to an increase in net purchases from spot exchange-traded funds (ETFs) in the United States. Daily ETF purchases have surged from 1,300 BTC at the beginning of the month to 5,800 BTC by October 29, with the highest daily purchase recorded at 7,700 BTC on October 13.
Despite this growing demand from ETFs, daily purchase volumes have not yet reached the levels seen in February and March, when investors were buying up to 16,000 BTC daily. CryptoQuant suggests that the current lower daily purchase volumes may explain investor apprehensions regarding Bitcoin's ability to reach a new high, despite the increasing ETF demand.
In the first quarter of 2024, Bitcoin experienced record highs even as the balance of the asset on OTC desks remained in negative territory. However, the situation has changed; there are now more Bitcoins available on OTC desks than at the beginning of the year. Currently, approximately 416,000 BTC are held on OTC desks, compared to the 183,000-193,000 BTC range observed in Q1 2024.
The increased availability of BTC on OTC desks means that daily ETF purchases now represent a smaller portion of the total Bitcoin inventory. Presently, these purchases account for only 1% to 2% of the total BTC balance on OTC desks, a significant drop from the 9% to 12% share recorded earlier this year. Analysts indicate that a rise in ETF demand is essential to reduce Bitcoin inventory on OTC desks.
On a positive note, the growth of BTC balances on OTC desks has slowed down compared to the rapid increases seen in the second and third quarters of the year, with monthly growth now at 3,000 BTC, down from 77,000 BTC and 92,000 BTC in August and June, respectively.
For Bitcoin to achieve new highs, it is crucial for ETF demand to increase while the inflows to OTC desks continue to decline, as historically, BTC rallies have occurred when OTC desk balances are negative.