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Are institutional crypto traders shifting to over-the-counter-trading (OTC) desks or are they just taking a break from the traditional exchange market?
The above question has found its place at the top of crypto enthusiasts’ concerns as a recent report from Diar showed that institutional cryptocurrency traders may have left the traditional exchange market for good. The report published on December 17 stated that “[i]nstitutional cryptocurrency trading on traditional exchanges have lost ground in volumes as Bitcoin is being welcomed into major outfit portfolios of the year.”
The findings of the research showed that Coinbase, a prominent crypto exchange, recorded high amount of sales on the OTC markets where institutional cryptocurrency products are listed compared to its counterpart, Grayscale’s Bitcoin Investment Trust (GBTC). This pushed GBTC, which had almost an equal amount of sales with Coinbase in 2017, down the pile.
Although the OTC markets depict an insignificant portion of the entire crypto market – as it is open for only 31% of the tradable hours every year – its volume tells a lot about the current state of the market. A rise of 20% in Bitcoin trading volume as recorded by Coinbase, goes a long way to show how far institutional Traders have drifted from the traditional exchange market.
This statistics has sprouted up many concerns, leaving crypto enthusiasts confused as to the stand of institutional traders and the likely cause of the shift. Among the possible causes for the shift, higher liquidity seen in OTC physical Bitcoin market seems to a better answer to the question. The report by Diar proposes that the shift could be as a result of investors seeking private placement in a market with clearer regulations.
This doesn’t come as a surprise as the volatile nature of the traditional exchange market has always been a reason for concern and the Bitcoin market has seen a rigid regulatory system this year. This has paved way for safe and secured transactions within the market. Another reasonable cause for this shift could be the development of custody solutions in the market. Also, the creation of multiple OTC trading desk avenues could be one of the many causes of this unexpected shift.
Bitcoin ETF was seen as the perfect medium to attract institutional money to the traditional market but as the fight for approval lingers, I think investors have resolved to other mediums. Following the shift experienced in the past months, all major exchanges in the United States now offer over-the-counter services while others have resolved to OTC as the only means of trading.
Commenting on the recent report by Diar, the Chief Executive Office of Peer-to-Peer exchange HodlHodl, Max Keidun, confirmed that the company, which also have an OTC Desk, has experienced an exponential increase in large order requests this year, with the requests doubling by the month.