Bitcoin ETF Launches Have a Subdued Impact on BTC Price, OTC Transfers May Be the Real Reason Behind the Tepid Performance
Despite the highly anticipated launch of spot Bitcoin Exchange-Traded Funds (ETFs) by BlackRock and Fidelity, BTC’s price response has been relatively subdued. While BTC reached a peak of $49,040 before the ETF launches, it is currently settling at $51,000, indicating a modest appreciation of 4.3%. This has left market observers puzzled, considering the massive net inflows of $5.278 billion into all Bitcoin ETFs within just six weeks.
The Bombshell Discovery: 700K BTC Transferred to OTC Desks
CryptoQuant CEO Ki Young Ju has made a surprising discovery that may explain the lackluster performance of BTC following the ETF approvals. According to Ju’s analysis, over 700,000 BTC (equivalent to approximately $35.6 billion) have been transferred to Over-The-Counter (OTC) desks predominantly used by miners in the weeks after the ETF launches.
By examining the data, Ju suggests that these substantial transfers could be the “real” reason behind Bitcoin’s price action. This finding has prompted a reevaluation of how such large-scale transactions impact the market dynamics of Bitcoin.
The Bitcoin OTC Mechanism: A Strategic Approach
OTC desks enable direct transactions between two parties without affecting the market price immediately. This method allows for large volumes of Bitcoin to be bought or sold without causing significant price volatility like on public exchanges.
Ju theorizes that issuers behind the newly launched Bitcoin ETFs strategically purchase Bitcoin through OTC desks. This approach serves two purposes: fulfilling demand from ETF investors and mitigating immediate price impact. By avoiding spot markets, ETF issuers can accumulate substantial amounts of Bitcoin without causing a sharp price increase.
According to Ju, if the 700,000 BTC were bought on the spot market instead of through OTC channels, Bitcoin’s price would likely have seen a more significant increase. The subdued price action can therefore be attributed to the strategic use of OTC transactions by ETF issuers and other large-scale buyers.
The Potential for a Supply Shock
While the use of OTC desks has helped maintain price stability, there is a potential supply shock on the horizon. If miners can only sell half of the current supply following the upcoming BTC halving in April, and demand remains strong, entities like BlackRock may need to purchase Bitcoin on the open market to support their ETFs. This could lead to a swift reaction in BTC price as OTC reserves are depleted and large-scale buyers turn to spot markets.
Currently, BTC is trading at $51,030.
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