The OTC bitcoin balance has reached a 2.5 year high of 410,000 tokens.
The run-up is similar to that which took place during the bull run of late 2020 into early 2021.
A decline in bitcoin balances will likely be necessary for a continuation of the recent bull run.
One possible headwind to the idea of ‘Uptober’ and a general fourth quarter rally for bitcoin (BTC) is the recent surge in tokens moving to over-the-counter (OTC) desks.
Data from CryptoQuant suggests there are over 410,000 bitcoins in total on OTC desks, the highest since May 2022 and more than double the 185,000 seen back in March.
The balance can indicate the amount of liquidity available at an OTC desk for purchase or sale, with a high balance showing strong liquidity and the ability for trading desks to fulfill large orders. A lower balance is the opposite and may indicate more difficulty in making trades.
Who uses OTC desks? Clients are mainly high-net-worth individuals or institutions outside retail exchanges. Making trades OTC allows sizable buys and sells without impacting the price of bitcoin on traditional exchanges.
The data show that the OTC balance has shot up in the past six months while bitcoin has been ranging in a downwards channel from its all-time high above $73,500 in March. The run-up in balances is fairly similar to that seen in late 2020 into early 2021 when the OTC balance shot up from 235,000 to 435,000 tokens in six months. The difference is that bitcoin’s price was on the rise then, but modestly downward now.
In the bear market of 2022, the OTC balance dropped alongside the decline in bitcoin’s price, suggesting net buying.
If bitcoin is to continue its bull run into the fourth quarter, one factor will likely be the need to see a drop in OTC desk balances.