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The Impact of Bitcoin Spot ETFs on Over-The-Counter Supply
The rapid growth of Bitcoin spot ETFs has significantly reduced the supply of Bitcoin available through over-the-counter (OTC) desks. This trend has been confirmed by Custodia Bank CEO Caitlin Long, who observed the scarcity of BTC for sale on major OTC desks.
Bitcoin OTC Supply Depletion
Recent data from blockchain analytics reveals a significant depletion of Bitcoin on OTC desks. The surge in demand for Bitcoin has pushed the price to over $62,000 per coin following a remarkable February rally, marking its largest monthly green candle close on record.
One of the main drivers of these price gains has been the substantial inflows to newly launched Bitcoin spot ETFs in the past 50 days, totaling over $7.4 billion in net inflows.
Bitcoin ETF Purchasing Behavior
Market makers of Bitcoin ETFs typically acquire new BTC through private purchases with large holders, known as over-the-counter (OTC) transactions. While this strategy helps prevent short-term slippage, it results in a depletion of available Bitcoin on the OTC desks.
As demand outstrips supply, OTC market participants are forced to return to public exchanges to source new Bitcoin, ultimately driving up the price of Bitcoin.
Evidence of OTC Bitcoin Depletion
Recent data from Glassnode indicates a rapid decline in available Bitcoin on OTC desks since December, reaching close to zero levels. While some analysts question the reliability of on-chain data for OTC Bitcoin, the overall trend suggests a scarcity of supply.
The Role of Bitcoin ETFs in Price Movements
Despite operating in the OTC market, Bitcoin ETFs have a noticeable impact on Bitcoin’s price movements. Notably, from February 26 to 28, ETFs absorbed over $500 million in daily inflows, leading to a surge in Bitcoin’s price from $52,000 to $64,000.
Conversely, the following day saw a more modest inflow of $92 million into the ETFs while Bitcoin’s price remained relatively stable around $62,000.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
