Bitcoin's OTC Supply Plummets 70%: A Looming Supply Shock

Bitcoin's over-the-counter (OTC) supply has plummeted by 70% since 2021, raising concerns about a potential supply shock in the cryptocurrency market. This significant decline in OTC desk balances has substantial implications for Bitcoin's price trajectory and market dynamics.

In the past, U.S. exchanges held nearly 1 million BTC, contributing to a substantial sell-side liquidity inventory. However, the balance on OTC desks has decreased to just 146,000 BTC, despite Bitcoin reaching $100,000. This steady decline reflects sustained institutional demand and the increasing use of OTC desks for large transactions.

The fall in Bitcoin held by OTC desks has significant implications. With only 146,000 BTC remaining, future large purchases will likely need to happen directly on public exchanges, which could influence prices more directly. U.S. exchanges currently hold nearly 1 million BTC, contributing to a substantial sell-side liquidity inventory. Additionally, miners, who have around 117,000 BTC, may also sell through OTC, but this varies depending on their preferences.

As OTC desk balances deplete, exchange-based transactions will become more prominent, leading to more noticeable and immediate price movements. Recent whale movements in Bitcoin are significant, with over 60,000 BTC moved in the past week. These movements, alongside netflow data, offered valuable insights into market behavior. Positive netflow into exchanges suggests selling pressure, but recent trends indicate a shift toward accumulation, which may signal an impending price rally.

The decline in OTC desk balances and the shift toward exchange-based transactions could cause Bitcoin's price to become more volatile. Large trades on exchanges may lead to short-term price spikes or drops, depending on market liquidity and sentiment. Given the accumulation by whales and the dwindling OTC reserves, we could see increased market volatility followed by a price stabilization at a higher level due to continued institutional demand.

As Bitcoin's market evolves, large transactions on exchanges will become the norm, making the market more dynamic and responsive to these shifts. The depletion of Bitcoin held on OTC desks and the shift to exchange-based buying signals a transformative phase for Bitcoin's market. Institutional investors' moves will increasingly influence the price, making Bitcoin's market more volatile in the