Bitcoin Spot ETFs Reduce Bitcoin Supply on OTC Desks
The rapid growth of Bitcoin spot ETFs has significantly decreased the availability of Bitcoin on over-the-counter (OTC) desks, according to blockchain data and Custodia Bank CEO Caitlin Long.
No BTC Available for Sale on OTC Desks
Caitlin Long recently stated that during her time in New York City, she observed a lack of BTC available for sale on major OTC desks. This scarcity of supply is believed to be one of the reasons behind the recent spike in Bitcoin’s price, which is currently trading at over $62,000 per coin.
Inflows to Bitcoin Spot ETFs Drive Price Surge
The surge in Bitcoin’s price can be attributed to significant inflows to newly launched Bitcoin spot ETFs over the past 50 days. These ETFs have already received over $7.4 billion in net inflows during this period.
Bitcoin ETF Market Makers and OTC Purchases
Market makers for Bitcoin ETFs typically purchase new BTC through private OTC purchases with large BTC holders. This approach helps prevent short-term slippage. However, when demand is overwhelming, these market makers must eventually return to public exchanges to source new Bitcoin, leading to an increase in Bitcoin’s price.
Rapid Decline in Bitcoin Available on OTC Desks
According to Glassnode data, the amount of Bitcoin available on OTC desks has rapidly declined since December and is now trending close to zero. However, some analysts argue that on-chain data for OTC Bitcoin may not be entirely reliable.
Impact of Bitcoin ETFs on Price
The impact of Bitcoin ETFs on Bitcoin’s price is evident from recent market movements. During a three-day period in February, ETFs absorbed over $500 million of inflows each day, resulting in Bitcoin’s price surging from $52,000 to $64,000.
Fluctuations in ETF Inflows and Bitcoin’s Price
The following day, while Bitcoin’s price remained stable at around $62,000, ETFs experienced a relatively modest inflow of $92 million. This suggests a correlation between ETF inflows and Bitcoin’s price movements.
Hot Take: OTC Desks Struggle to Meet Demand for Bitcoin
The rapid growth of Bitcoin spot ETFs has caused a scarcity of Bitcoin on OTC desks. As market makers for these ETFs conduct private purchases with large BTC holders, the availability of BTC on OTC desks has significantly declined. This shortage of supply has contributed to the recent spike in Bitcoin’s price. While some analysts question the reliability of on-chain data for OTC Bitcoin, the impact of ETF inflows on Bitcoin’s price is evident. Moving forward, it will be interesting to see how the dynamics between Bitcoin spot ETFs and OTC desks continue to evolve.
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