Bitcoin OTC Indicators Point to Ongoing Institutional Buying And This Means Only One Thing

Bitcoin is holding firmly to its gains made during the wild rally of 4Q20. Trading above $24,000, yes, another all-time high on the weekend, with $4.7 billion in ‘real’ volume, BTC/USD is up 230% this year.

Despite these substantial gains, bitcoin is not looking like it will correct anytime soon. Many are expecting the digital asset to run even higher up before any pullback could be expected.

Similar views are of Ki-Young Ju, CEO of data provider CryptoQuant, and the reason for this continued bullishness is the ongoing institutional buying.

“This BTC bull-run never stops as long as these OTC indicators keep saying institutional-buying,” said Ju pointing to all the large over-the-desk deals still going on vigorously.

For starters, massive outflows can be seen in Coinbase BTC outflows going to their new cold wallet for custody that held 6k to 8k BTC. Whenever the US’s biggest exchange moves a significant amount of Bitcoins to other cold wallets, it indicates OTC deals.

The largest digital asset manager, Grayscale, which continues to add up BTC to its stash, uses Genesis Trading for buying Bitcoin, which in turn uses Coinbase OTC desks for that. Coinbase was the one that helped MicroStrategy in its initial $250 million investment. Ruffer also confirmed that they purchased their BTC via Coinbase.

Another indicator is the Fund Flow Ratio for all exchanges, the ratio of network transaction volume of exchanges among all the tokens transferred on the network. If this value goes up, it implies most of the network transactions are exchange deposits/withdrawals; otherwise, transaction volumes are coming from non-exchange wallets. Young Ju noted,

“Since the price is eventually determined on exchanges, massive non-exchange transaction volume is considered as a bullish signal. These transactions include OTC deals.”

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Currently, only 5% of the network transactions are used for exchange deposits and withdrawals. The same level was seen in February 2019 when major exchanges launched OTC desks.

Looking at Tokens Transferred, which is the number of Bitcoins transferred on the network, this indicator has been trading up ever since early August.

If the value of Token Transferred goes up and the fund flow ratio for all cryptocurrency exchanges goes down, it again “implies that huge OTC deals are ongoing.”

Based on these on-chain indicators that estimate OTC deals going under the hood by institutional investors, large OTC deals are happening, and they point out that “institutions are continuing to buy BTC.”

So, much like this week, which saw several levels and all-time highs getting breached, we could continue further up.

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Author: AnTy

Is Bitcoin’s Store of Value Narrative Really in Danger with its Correlation with Stocks on Rise?

While Bitcoin is holding $10,000 firmly, it did slide to nearly $10,400 on Friday following the news of President Donald Trump testing positive for coronavirus.

And so did the stocks by 1%. This has been because of Bitcoin’s correlation with the S&P 500, which is just above +47%.

This, according to some means, BTC is “a mature, highly-correlated asset that does poorly during episodes of political uncertainty.”

While gold did exactly the opposite of Bitcoin’s, uptrending to $1,917 and its one-month correlation with BTC declining to -20% down from the peak of +76.3% on Sept. 19, as per Skew, today, the precious metal moved back under $1,900.

Bitcoin, meanwhile moved above $10,550 today, trading in the green.

Also, as trader Qiao Wang said, “Bitcoin is up 44% in the single most politically uncertain year of my life outperforming virtually every single macro asset class.”

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The markets, in general, are uncertain and directionless ahead of elections in the first week of November, which means October is expected to be choppy.

“We need more clarity on the election cycle and additional stimulus to help get things moving again in equities — and also in Bitcoin,” said Meltem Demirors, chief strategy officer of CoinShares. “Bitcoin has stayed range-bound despite a slew of positive news, largely because there is not enough inflation due to weak aggregate demand. We need Bitcoin’s behavior to match its narrative before we see a breakout.”

For the leading cryptocurrency, in the last few days, several incidents curbed its upside but didn’t drag it on the downside either. The third biggest $281 million KuCoin exchange hack and CFTC bringing criminal charges on popular crypto derivatives platform BitMEX only added pressure to the market sentiments, which have turned to “fear” this month.

In the near term, bitcoin is expected to stay range-bound. But an environment of limited upside for equities and bonds could benefit the digital asset, as per Bloomberg Intelligence analyst, Mike McGlone.

“Bitcoin is unique due to its limited supply, which unlike most assets isn’t influenced by prices, tilting the bias toward appreciation,” said McGlone. Moreover, it “appears as the leader in the early days of a paradigm shift toward digital money and stores of value. It may fail, but we see that as unlikely.”

He further said the coin is “growing up fast,” with many of its adoption indicators positive.

Over the past three months, the long-term supply bands in HODL waves that show BTC supply shift over time have been growing, signaling Bitcoin’s use as a store of value – a positive sign for the long-term health of the network.

The percent of BTC supply held for at least one year also continues to grow, going to its highest level since 2012 at over 63% on Sept. 30th. Additionally, the number of addresses holding at least 0.1 BTC had a noticeable uptick since March, suggesting more users might be joining the largest network.

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Author: AnTy