Bitcoin (BTC) is currently experiencing strong positive momentum, bringing it very close to its all-time high of $73,750. On October 29, the leading cryptocurrency came within a few hundred dollars of surpassing that milestone before undergoing a minor correction. As of now, it is trading around $72,200.
While many market participants anticipate new price records in the near future, analysts at CryptoQuant have highlighted the significant role that Bitcoin over-the-counter (OTC) availability could play in shaping the asset’s price trajectory.
Bitcoin’s Rally Driven by ETF Demand
According to a recent CryptoQuant report, the ongoing Bitcoin rally is largely fueled by increasing net purchases from U.S. spot Bitcoin exchange-traded funds (ETFs). Daily purchase volumes have risen substantially, climbing from 1,300 BTC at the beginning of the month to 5,800 BTC by October 29. The highest single-day purchase for October—7,700 BTC—was recorded on the 13th.
Despite this growing ETF demand, daily purchase volumes have not yet reached the peaks observed in February and March, when investors acquired up to 16,000 BTC in a single day. According to CryptoQuant, these comparatively lower daily volumes may help explain why Bitcoin has not yet reached a new all-time high despite strong institutional interest.
The Role of OTC Desk Balances
In the first quarter of 2024, Bitcoin’s price surged to record highs while the growth in BTC balances on over-the-counter desks remained negative. Currently, the situation is reversed: there is more Bitcoin available on OTC desks than at the start of the year. While OTC balances ranged between 183,000 and 193,000 BTC in Q1 2024, that figure has now grown to approximately 416,000 BTC.
This increased availability means that daily ETF purchases now represent a smaller percentage of the total Bitcoin inventory on OTC desks. Currently, ETF acquisitions account for only 1% to 2% of the total OTC balance, compared to 9% to 12% in the first quarter. Analysts suggest that significantly higher ETF demand will be necessary to reduce these inventories.
On a positive note, the growth rate of BTC balances on OTC desks has slowed compared to the second and third quarters, due to reduced inflows. Monthly growth now stands at around 3,000 BTC, a sharp decline from the 77,000 BTC and 92,000 BTC increases seen in August and June, respectively.
Since Bitcoin tends to rally when OTC desk balances are in decline, two conditions must be met for new all-time highs: ETF demand must increase, and OTC inflows must remain subdued.
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Frequently Asked Questions
What are Bitcoin OTC desks?
Over-the-counter (OTC) desks facilitate large-volume cryptocurrency trades executed directly between parties outside of traditional exchanges. They are often used by institutional investors to avoid affecting market prices.
How does OTC availability influence Bitcoin’s price?
When OTC desk balances are high, supply is abundant, which can suppress price increases. Conversely, declining OTC balances often signal rising demand and can lead to price rallies.
Why are ETF purchases important?
ETF purchases represent institutional and large-scale investor demand. When ETF inflows are high, they can absorb available supply, potentially driving up prices—especially when OTC balances are low.
What is the current relationship between ETF demand and OTC supply?
Currently, ETF purchases account for a smaller share of OTC balances than earlier this year. This means stronger ETF buying activity is needed to reduce available supply and support upward price movement.
Can OTC data predict Bitcoin price trends?
While not definitive, OTC balance trends offer insight into supply and demand dynamics. A decreasing OTC balance often coincides with bullish market conditions, while growing balances may indicate selling pressure or increased supply.
What other factors influence Bitcoin’s price?
Besides OTC supply and ETF demand, factors such as macroeconomic conditions, regulatory news, market sentiment, and technological developments also play important roles in shaping Bitcoin’s price.