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The swift expansion of Bitcoin spot ETFs has significantly diminished the amount of Bitcoin accessible through over-the-counter (OTC) desks.
This trend is evident in blockchain data and was recognized by Custodia Bank CEO Caitlin Long on Thursday.
Bitcoin OTC Supply Depletes
“I spent time in NYC over the past couple of days and it’s clear why the Bitcoin price surged this week: there was nearly no BTC available for purchase on the major OTC desks,” Long stated on X.
Bitcoin is currently trading above $62,000 per coin following a substantial rally in February—marking its largest monthly green candle close ever recorded.
A significant portion of these gains was fueled by substantial inflows into newly established Bitcoin spot ETFs over the last 50 days, which have already attracted over $7.4 billion in net inflows during that period.
Market makers for Bitcoin ETFs acquire new BTC “over the counter” or “OTC”—indicating they engage in private transactions with large BTC holders instead of collecting coins directly from the open market.
While this approach mitigates short-term slippage, suppliers must eventually revert to public exchanges to obtain new Bitcoin when demand is excessive, ultimately driving up Bitcoin’s price.
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“Only about 40 BTC were available for sale at any price at one point on Wednesday, I was informed by a reliable source,” Long added.
As per Glassnode data, the Bitcoin available on OTC desks has rapidly decreased since December and is now nearing zero.
WARNING: The #Bitcoin price is about to go parabolic! There’s no OTC Bitcoin available while BlackRock customers are purchasing half a billion dollars’ worth daily… pic.twitter.com/DVFc9KhVKi
— sunnydecree (@sunnydecree) March 1, 2024
However, some analysts suggest that on-chain data for OTC Bitcoin may not be entirely reliable.
“The notion that OTC desks are completely out of supply is absurd,” remarked Reflexivity Research co-founder Will Clemente on X on Friday. “Glassnode will be the first to inform you that they only monitor three desks, and these wallets are quite challenging to track.”
Bitcoin ETF Influence On Price
Despite Bitcoin ETFs functioning in the OTC market, their prompt effect on Bitcoin’s price is quite apparent. From February 26 to 28, the ETFs absorbed over $500 million in inflows each day, while Bitcoin’s price escalated from $52,000 to $64,000.
The following day, Bitcoin’s price remained stable at around $62,000, while ETFs experienced a relatively modest inflow of $92 million.
[1/4] Bitcoin ETF Flow – 29th Feb 2024
All data in. $92m of positive flow for the day, with Blackrock and GBTC offsetting each other, each with $600m flow in the opposite direction pic.twitter.com/f5uFFxl1YS
— BitMEX Research (@BitMEXResearch) March 1, 2024
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