If you ask 10 people, 9 people would say that Institutional money is expected to trigger the next bull run in crypto markets. It was assumed that the Bitcoin ETF would open floodgates for institutional money, but umpteen number of rejections and delays seems to have forced institutional investors to take various routes into cryptos. The recent research report from Diar Research believes it’s the OTC market where all the institutional and traditional money is going to.
OTC market proving out to be the perfect platform for Institutional investors
According to the research put forward by Diar, the institutional investment in OTC markets offered by Coinbase has seen a stark increase especially in the last few months of the year. The research found that Coinbase’s OTC markets performed better than Grayscales’s Bitcoin Investment Trust (GBTC) in terms of trade volumes despite OTC markets were open only for just 31 percent of yearly tradeable hours.
The report also references Diar’s previous research which said that in the first three quarters of this year Grayscale saw net inflows of $216Mn into its Bitcoin Investment Trust. And now even while the interest has slightly worn off from peak hype, Grayscale now sits on a holding custody of over 1% of Bitcoin’s circulating supply
On the other hand, in 2018, Coinbase reportedly saw a 20 percent increase in BTC trading volume during OTC markets hours, while GBTC saw a 35 percent drop in volumes compared with the same period in 2017.
The report suggests the reason for this shift to be time restrictions, 24/7 operational availability, and regulation. The report mentions
“The shift could be a sign of investors seeking private placement in a market that has seen regulatory clarity, at least in terms of Bitcoin, the development of custody solutions, many of whom have also secured insurance cover, as well as multiple Over-the-Counter trading desk avenues.”
It also mentions that scrutiny in and around Bitcoin is significantly enhanced which is keeping them away from the tradition exchange
“problems still arise as large fiat transactions linked to Bitcoin remain to be scrutinized by the banking sector despite providing ample documentation clearing Know-Your-Client requirements.”
With respect to 24/7 availability the report states
“Coinbase which represents only a fraction of global markets sees over 30% more trading outside of traditional exchange hours. With no time stop on trading, institutions and big money would require access around the clock from fears of a rude awakening in a market that remains highly volatile, despite that decreasing to new lows this year”
With so much of attention moving to OTC markets, its no surprise that nearly All major exchanges in the US now offer OTC services, with many other players addressing the market solely. Let’s see if the trend changes in near future.
Will volumes come back to exchanges once the BTC ETF is cleared? Do let us know your views on the same