Crypto CEO Drops Bombshell Discovery Why Bitcoin Price Is Muted Post-ETFs
February 23 2024 - 5:00AM
NEWSBTC
Despite the landmark launch of spot Bitcoin Exchange-Traded Funds
(ETFs) spearheaded by industry behemoths BlackRock and
Fidelity—ranking among the top five ETF launches in their initial
month of all time—BTC’s price response has been notably subdued.
Prior to the launch of these EFTs, BTC soared to a peak of $49,040
on January 11. Fast forward to today and BTC is currently settling
at $51,000, marking a modest appreciation of 4.3%. This tepid
performance has puzzled market observers, particularly in light of
massive net inflows of $5.278 billion into all Bitcoin ETFs within
a mere six-week span. These could have been even significantly
higher if there would have been $7.398 billion in outflows from
Grayscale’s GBTC. The Bombshell Discovery Yet, CryptoQuant CEO Ki
Young Ju may now have found the “real” reason that has had an even
bigger impact on Bitcoin’s price action in recent weeks. Ju’s
analysis highlights the transfer of over 700,000 BTC to
Over-The-Counter (OTC) desks predominantly utilized by miners in
the weeks succeeding the spot Bitcoin ETF approvals—an equivalent
of approximately $35.6 billion at current prices. Related Reading:
Analyst: Bitcoin Has Never Been This Bullish, What’s Next? He
shared the below chart and stated: “700K BTC has moved to OTC desks
used by miners over the past three weeks following spot Bitcoin ETF
approval.” This revelation has sparked a reevaluation of the impact
of such substantial transfers on the market dynamics of Bitcoin. Ju
later corrected his statement slightly and explained, “Got some
questions about the data accuracy. These OTC addresses are not only
used by miners. It could be used by other whales. We’ll let you
know what addresses caused this spike,”acknowledging the complexity
and multifaceted nature of these transactions. The Bitcoin OTC
Mechanism Explained OTC desks facilitate direct transactions
between two parties, unlike open exchanges where orders are matched
among various participants. This method of trading can handle large
volumes of Bitcoin without immediately affecting the market price.
When substantial amounts of BTC are bought or sold on public
exchanges, the sudden increase in supply or demand can lead to
significant price volatility. By opting for OTC transactions, large
buyers, such as ETF issuers, can accumulate Bitcoin in vast
quantities without triggering a steep price increase that would
inevitably follow if these purchases were made on spot markets.
Related Reading: Galaxy CEO Cautions Bitcoin May Fall To $42,000
Ahead Of Major Rally Thus, Ju theorizes that the issuers behind the
newly launched Bitcoin ETFs are strategically purchasing Bitcoin
via OTC desks. This approach serves a dual purpose: it allows these
entities to fulfill the demand from ETF investors by securing
enough Bitcoin to back the ETF shares while simultaneously
mitigating the immediate price impact that such large-scale
purchases would have if conducted on open exchanges. The essence of
Ju’s claim is that if the 700,000 BTC had been bought on the spot
market instead of through OTC channels, the influx of demand would
have likely propelled Bitcoin’s price significantly higher than the
observed 4.3% increase. This subdued price action, therefore, could
be attributed to the strategic use of OTC transactions by ETF
issuers and other large-scale buyers. However, there is also a
silver lining. What will happen if the miners can only sell half of
the current supply following the upcoming BTC halving in April, but
the demand remains? Moreover, this constraint isn’t limited to
miners alone. Given that the OTC supply is finite and likely
depleting rapidly, it appears inevitable that a supply shock could
impact the market once the OTC reserves are fully tapped. When
entities like BlackRock and others are compelled to purchase
Bitcoin on the open market to back up their ETFs, the BTC price
could react swiftly. At press time, BTC traded at $51,030. Featured
image created with DALL·E, chart from TradingView.com
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