Rapid Growth and Impact
The rapid increase in Bitcoin spot ETFs has significantly limited the availability of Bitcoin through over-the-counter (OTC) desks. This development has been evident through blockchain data, as highlighted by Caitlin Long, CEO of Custodia Bank.
“I spent time in NYC over the past couple of days and it’s clear why the Bitcoin price spiked this week: there was almost no BTC available for sale on the big OTC desks,”
Bitcoin is currently being traded at over $62,000 per coin after a substantial rally in February, marking its largest monthly green candle close on record. The surge in Bitcoin’s value has largely been fueled by substantial inflows into newly launched Bitcoin spot ETFs, which have accumulated more than $7.4 billion in net inflows over the past 50 days.
Market makers of Bitcoin ETFs typically acquire new BTC through private OTC transactions with significant BTC holders. While this method reduces short-term price slippage, it necessitates suppliers to eventually return to public exchanges to source additional Bitcoin during periods of high demand, consequently driving up the price of Bitcoin.
“Only ~40 BTC available for sale at any price at one point on Wednesday, I was told by a credible source,”
According to Glassnode data, the available Bitcoin on OTC desks has dwindled rapidly since December, reaching near-zero levels. However, some analysts caution that on-chain data relating to OTC Bitcoin might not be completely reliable.
Reflexivity Research co-founder Will Clemente stated,
“The idea that OTC desks are literally out of supply is comical. Glassnode will be the first to tell you that they only track 3 desks & these wallets are very difficult to track.”
Market Dynamics
Despite operating in the OTC market, the impact of Bitcoin spot ETFs on Bitcoin’s price is markedly significant. Throughout February 26 to 28, these ETFs witnessed daily inflows exceeding $500 million, coinciding with Bitcoin’s price surge from $52,000 to $64,000.
The subsequent day saw Bitcoin’s price stabilizing around $62,000, while ETFs experienced a more moderate inflow of $92 million. This underscores the noticeable influence of Bitcoin spot ETFs on the overall market dynamics.
