- Institutional interest is continuing to rise in the cryptocurrency industry
- Large institutional investors are using OTC market platforms to purchase Bitcoins
- Observing the spike in the outflow of BTC, the decline in fund flow ratio, an increasing number of BTC transferred on the blockchain, seems like soon more such investors will enter the market
Recently it is observed that with the soaring price of Bitcoin, the number of institutional investors is also increasing. Several large institutional investors are using Over-The-Counter (OTC) trading platforms to purchase BTC and keep their purchases from impacting the prices in the entire market. However, it is not new as unlike retail and small business investors, and large institutional investors usually trade through the OTC market.
Why institutional investors choose OTC platforms?
The main reason for choosing the OTC market is not to affect the prices. Using OTC markets, the transaction of such investors won’t impact prices the way they would through exchanges. Another reason is that in the OTC market transactions are more opaque, compared with transactions on exchanges. However, there is an advantage, that without transparent data, the transactions are difficult to monitor or gauge.
Spike in Bitcoin outflow from exchanges cold wallets
CryptoQuant, the blockchain analytics firm, has monitored three different metrics. The data have provided an idea of what’s going on in the OTC market. Indeed, observing the metrics, it seems like in the coming weeks or months may come out to disclose their BTC positions.
According to Ki Young Jun, the chief executive officer of CryptoQuant, when the massive discharge of the most famous cryptocurrency takes place, it goes to the firm’s cold wallets for custody. Such wallets hold around 6000 to 8000 of Bitcoins. If we take a closer look at the spike in BTCs outflow of last week, it is clear that around 8000 to 15,000 BTC were moved out to other cold wallets from Coinbase Pro. Financial service provider firms, like MicroStrategy and Ruffer, have also revealed that their purchases of millions worth Bitcoin, were also facilitated by Coinbase.
The decline in fund flow ratio for all crypto exchanges
Observing another metric from CryptoQuant, it is found that the fund flow ratio for exchanges has declined, since March’s crash. Indeed, the fund flow ratio is the ratio of the network transaction volume of the exchanges compared with the entire virtual currency transferred on the network. However, a lower number of the ratio means a lower number of transactions on the exchanges, and are being conducted outside such exchanges.
The third metric showed that the total number of Bitcoin being transferred on the blockchain has also been increased continually. However, combining all three metric data, we can conclude that it is time for institutional investors. According to Matthew Hougan, the chief investment officer at Bitwise Asset Managers, it seems like an entire class of new investors wants to establish positions in the industry.
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