Bitcoin OTC transactions mousetrap 99% of trade volumes—who is buying?

Bitcoin, Bitcoin OTC transactions mousetrap 99% of trade volumes—who is buying?
“Bull trap” by wuestenigel is licensed under CC BY 2.0

Key Bitcoin Takeaways:

  • A sudden spike in trading volume, without changing the exchange inflow. What does that mean?
  • What is OTC trading and who benefits from it?

Yerevan ( – Bitcoin tokens worth $131 billion were moved on August 1, but exchanges registered only 1 percent of them, reports CryptoQuant, an on-chain analytics platform. The tweet also contains graphs indicating the exchange inflow stats for Q1 2021.

Also read: Willy Woo’s Bitcoin liquidity supply shock model sees BTC at $55K.

Bitcoin tokens in transactions seem disproportionate to the low inflow to the exchanges, as statistics show. Ki-Young Ju, a South Korea-based crypto analyst and the CEO of CryptoQuant, cited a sharp spike in transferred tokens without a slight effect on the inflow stats to the exchanges.

He tweeted a chart illustrating the confusion, noting that the mentioned transactions could be over-the-counter(OTC) transfers, independent of exchange platforms.

Bitcoin, Bitcoin OTC transactions mousetrap 99% of trade volumes—who is buying?

The graph above indicates that a spike in OTC transactions coincides with declines in exchange fund inflows, which are often brought on by a price surge. The dissonance between the two has also happened in September 2020. Mr. Young Ju indicates that if any big players come forth with an admitted buy, the BTC price could climb higher.

Bitcoin grew from $29,431 on July 21 to $42,335 on July 30, logging a 42 percent gain. Higher prices drove many investors to hold their BTC assets rather than swap them, which was visible in the outflow rates from all exchanges.

Also read: Bitcoin price taps $42,000 amid strong accumulation trend, will BTC hit $50,474 next?

OTC trading details

The leading players on the OTC markets are usually high-profile holders like institutional investors, hedge funds, and professional traders. Miners are also among the usual participants. Many exchanges like Kraken and River Finance have opened OTC desks on their platforms to meet the demand.

The advantages of Bitcoin TC trading include a low risk of price slippage because of inferior liquidity. Moreover, OTC trading allows buying large amounts of crypto at once. However, exchanges have a more challenging time managing large transactions. They often have to break the order up into pieces to maintain liquidity.

In addition, OTC desks provide higher anonymity, which suits the whales. Over-the-counter trading excludes the third party, so to complete a transaction, the buyer has to reach out to a broker with an offer. The broker then finds an appropriate seller. Once the two connect, the broker is no longer involved in the deal.

Also read: Bitcoin week ahead Ep14: Focus shifts to Ethereum’s major hard fork event.

The sudden spikes in transaction volume indicate the high interest of big players to buy and hold Bitcoin. Moreover, the outflow from exchange funds points in the same direction. Therefore, despite the bearish price action in the past week, Bitcoin might face another uptrend, says Ki-Young Ju, citing the possible OTC deal.

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