Entering the fourth quarter, many investors are optimistic that the cryptocurrency market will return to strength and expect Bitcoin's "Uptober effect" to reappear, but the recent surge in the number of Bitcoins transferred to over-the-counter (OTC) platforms may bring headwinds to the cryptocurrency market. The escalating conflict in the Middle East has also put great pressure on the market.
The total amount of bitcoins on major OTC platforms currently exceeds 410,000, the highest level since May 2022, and more than double the 185,000 bitcoins seen in March.
This balance number can show the liquidity scale of Bitcoin available for trading on the OTC platform; a high balance represents strong liquidity and the ability of the OTC trading platform to meet large orders for trading. Conversely, if the balance is low, it means that it is more difficult to trade.
So, who will use OTC trading platforms? Mainly high-net-worth individuals or institutions, who can hedge the impact of Bitcoin prices on traditional cryptocurrency exchanges through OTC transactions.
Data shows that the Bitcoin balance of OTC platforms has increased significantly in the past six months. During the same period, Bitcoin has fallen from its all-time high of $73,500 in March and continued to fluctuate in a downward channel.
This increase in balance is very similar to the situation from the end of 2020 to the beginning of 2021, when the OTC balance also soared from 235,000 bitcoins to 435,000 bitcoins in 6 months, but the difference is that the price of Bitcoin was rising at that time, while it is relatively weak now.
During the 2022 bear market, OTC balances shrank as Bitcoin prices fell, indicating net buying.
If we want to see Bitcoin continue its bullish trend in the fourth quarter, one of the necessary factors is that the balance of the OTC platform has decreased, which will help support further strength of the market.
The price of Bitcoin continued to fall, from $65,000 to below $62,000, reaching a new low in several weeks. This is the lowest point since the Fed cut interest rates by two basis points in September. The sharp fluctuations caused nearly 120,000 over-leveraged long traders to be liquidated, with a total value of $350 million. The main currencies are still concentrated in Bitcoin and Ethereum, and most currencies have shown a net outflow of funds.
The main selling pressure this time came from the Bitcoin spot ETF. On Tuesday's trading day in the United States, the net outflow of Bitcoin ETF funds reached 120 million US dollars, which was the highest in recent consecutive outflows. Although it cannot represent all, it somewhat suggests that global funds are flowing out of the United States to China and Japan, and the U.S. capital market will face a brief stagnation.
But the situation will not last long. The Japanese yen has already deleveraged once before, and it is not expected to have much impact on trading sentiment. What is more noteworthy is the Chinese stock market. Currently, foreign capital is rushing into A-shares and Hong Kong stocks for speculation, constantly pushing up prices. It is necessary to wait for funds to withdraw before returning to the US market. During this period, the trends of US stocks and cryptocurrencies will face greater challenges.
If the cryptocurrency market wants to rise further, it must wait until this batch of speculative funds has finished speculating in the Chinese and Hong Kong stock markets before there will be a greater chance. Many hedge funds have withdrawn part of their funds from the United States and turned to the Chinese and Hong Kong markets for speculation. They are also important drivers of buying cryptocurrency ETFs. However, the cryptocurrency market lacks buying sentiment now, and investors must wait for a while.
