Bitcoin OTC Indicators Point to Ongoing Institutional Buying, And This Means Only One Thing
Bitcoin is holding firmly to its gains made during the wild rally of 4Q20. Trading above $24,000, yes, another all-time high on the weekend, with $4.7 billion in ‘real’ volume, BTC/USD is up 230% this year.
Despite these substantial gains, bitcoin is not looking like it will correct anytime soon. Many are expecting the digital asset to run even higher up before any pullback could be expected.
Similar views are of Ki-Young Ju, CEO of data provider CryptoQuant, and the reason for this continued bullishness is the ongoing institutional buying.
“This BTC bull-run never stops as long as these OTC indicators keep saying institutional-buying,” said Ju pointing to all the large over-the-desk deals still going on vigorously.
— Barry Silbert (@BarrySilbert) December 19, 2020
For starters, massive outflows can be seen in Coinbase BTC outflows going to their new cold wallet for custody that held 6k to 8k BTC. Whenever the US's biggest exchange moves a significant amount of Bitcoins to other cold wallets, it indicates OTC deals.
The largest digital asset manager, Grayscale, which continues to add up BTC to its stash, uses Genesis Trading for buying Bitcoin, which in turn uses Coinbase OTC desks for that. Coinbase was the one that helped MicroStrategy in its initial $250 million investment. Ruffer also confirmed that they purchased their BTC via Coinbase.
Another indicator is the Fund Flow Ratio for all exchanges, the ratio of network transaction volume of exchanges among all the tokens transferred on the network. If this value goes up, it implies most of the network transactions are exchange deposits/withdrawals; otherwise, transaction volumes are coming from non-exchange wallets. Young Ju noted,
“Since the price is eventually determined on exchanges, massive non-exchange transaction volume is considered as a bullish signal. These transactions include OTC deals.”
Currently, only 5% of the network transactions are used for exchange deposits and withdrawals. The same level was seen in February 2019 when major exchanges launched OTC desks.
Looking at Tokens Transferred, which is the number of Bitcoins transferred on the network, this indicator has been trading up ever since early August.
If the value of Token Transferred goes up and the fund flow ratio for all cryptocurrency exchanges goes down, it again “implies that huge OTC deals are ongoing.”
Based on these on-chain indicators that estimate OTC deals going under the hood by institutional investors, large OTC deals are happening, and they point out that “institutions are continuing to buy BTC.”
So, much like this week, which saw several levels and all-time highs getting breached, we could continue further up.