Coinsfera, the global over-the-counter(OTC) digital asset trading platform, announced that it allows users to buy or sell stablecoin USDT in Dubai over OTC.
Users can now purchase or sell USDT in cash directly by visiting the Coinsfera crypto OTC desk without the need for a bank account or credit card.
Coinsfera is an exchange for buying and selling cryptocurrency with cash in Istanbul of Turkey, Dubai of UAE, Kosovo of Prishtina, and so forth.
Due to the recent market volatility, crypto investors are largely looking to sell their holdings of BTC, Ethereum, and other cryptocurrencies and buy USDT to keep their assets in a stable currency and avoid market volatility.
Tether (USDT) is a cryptocurrency with a value meant to mirror the value of the U.S. dollar.
Users can contact Coinsfera via Whatsapp or phone, and a staff member will arrange a meeting. This service is available across the UAE.
This is a big deal because it opens up a whole new world of possibilities for those who want to capitalize on cryptocurrency profits.
According to the exchange, customers only need to bring their ID or passport to use Coinsfera’s services. Tourists only need to bring their passports to buy/sell USDT at the OTC counter.
Instead of buying Bitcoin or Ethereum first, they can sell USDT directly for cash. This will be especially helpful for those who want to use cryptocurrencies for local payments or remittances.
With Tether, they will be able to avoid the high fees associated with traditional banking methods.
Dubai is more than just a well-known tourist destination in the world but also aspires to be the global financial centre in the Middle East. Dubai comes off as one of the latter with the slew of licenses being granted to cryptocurrency exchanges. As reported by Blockchain.News, OKX, one of the leading crypto exchanges in the digital currency ecosystem, is one of the latest in the industry that has just been given the green light to operate in Dubai.
Despite Beijing’s ever-increasing crackdown on the crypto industry, there are still some signs of life in the People’s Republic regarding the Bitcoin network and OTC trading.
China intensified its clampdown on crypto last week in an effort to suppress any remaining activity related to digital assets within its borders. The regime specifically targeted crypto transactions, but as researched by Cointelegraph, this action is nothing new with at least 19 similar crackdowns over the past decade or so.
Despite the latest move, there are still 135 Bitcoin nodes in operation in China according to data from Bitrawr which measures nodes by geographical location. However, this is just 1.21% of the total 11,262 Bitcoin nodes spread across the planet. There may be more if they are operating behind virtual private networks (VPNs) and/or using onion routing with Tor which masks locations
Bitcoin nodes are the software that runs the protocol, containing the full ledger or a segment of it containing a history of the transaction data. Distributed and decentralized systems are specifically designed to be hard to shut down completely so the regime may struggle to extinguish these final few hangers-on or those operating via Tor.
While it’s difficult to put figures on the volume due to its opaque nature, over-the-counter (OTC) trading is also maintaining a foothold in China according to various reports as is the local currency pair.
Local media outlet Wu Blockchain reported that the RMB/USDT pair, which is still offered by major exchanges such as OKEx and Huobi, has been trading at a premium. He noted panic selling last week, which has since subsided.
OKEx is currently offering 6.35 yuan for 1 USDT where the actual exchange rate for a greenback is 6.47 according to XE.com.
Related:Institutional investors bought the dip as China FUD broke
OTC trades are carried out peer-to-peer which circumvents the usage of a bank or the spot markets on centralized exchanges — though many exchanges do have related OTC desks. According to Coindance, volumes in China have been relatively stable since early 2020 with around 7 million Yuan (around $US1 million) being traded per week on P2P platform Localbitcoins.
Localbitcoins volume CNY – coin.dance
Former CEO of China’s first crypto exchange BTCC, Bobby Lee, thinks that Beijing will target OTC desks in its next crackdown. Earlier this week, he said that OTC platforms that are operated by the big exchanges will be closed down or forced to exclude Chinese users. Speaking to Bloomberg on Sept. 29, Lee added:
“They really don’t want any loopholes where people can use a digital currency as a vehicle to move assets abroad.”
He followed that up with a prediction that BTC markets are due another FOMO rally that could send prices to $200,000.
Bitcoin (BTC) might have suffered its largest coordinated attack over the last couple of months, but in this instance, the investor community did not capitulate. China outright banning mining in most regions after giving BTC miners a two-week notice and this caused the single largest mining difficulty adjustment after the network hash rate dropped 50%.
The market sentiment surrounding Bitcoin was already damaged after Elon Musk announced that Tesla would no longer accept Bitcoin payments due to the environmental impact of the mining process. It remains unknown whether China’s decision was influenced or related to Musk’s remarks, but undoubtedly those events held a negative effect.
A couple of weeks later, on June 16, China blocked cryptocurrency exchanges from web search results. Meanwhile, derivatives exchange Huobi started to restrict leverage trading and blocked new users from China.
Finally, on June 21, the People’s Bank of China (PBoC) instructed banks to shut down the bank accounts of over-the-counter desks and even their social networks accounts were banned. OTC desk essentially act as a fiat gateway in the region so without them it would be difficult to exchange from Bitcoin to stablecoins.
As these events unfolded, some analysts were reluctant to describe the tactics as nothing other than meaningless FUD, but in hindsight, it appears that China launched a very well-planned and executed attack on the Bitcoin network and mining industry.
The short-term impact could be considered a moderate success due to the collapse in Bitcoin price and the rising concerns that a 51% hashrate attack could occur.
Regarding Bitcoin Mining and China, I would not believe anything you hear. I would not rule out the possibility that the Chinese Communist Party is trying to orchestrate a 51% attack on the Bitcoin network. Stay vigilant.
— Danny Diekroeger (@dannydiekroeger) June 25, 2021
Despite the maneuvers, China’s attack ultimately failed and here are the main reasons why.
The hashrate recovered to 100 million TH/s
After peaking at 186 million TH/s on May 12, the Bitcoin network hash rate, an estimate of the total mining power, started to plunge. The first couple of weeks were due to restrictions to coal-powered areas, estimated at 25% of the mining capacity.
However, as the ban extended to other regions, the indicator bottomed at 85 million TH/s, its lowest level in two years.
As the data above indicates, the Bitcoin network’s processing power recovered to 100 million TH/s in less than three weeks. Some miners had successfully moved their equipment to Kazakhstan, while others shifted to Canada and the U.S.
Peer-to-peer (p2p) markets carried on
Even though the companies involved in crypto transactions have been banned from the country, individuals continued to act as intermediaries—some of these recorded over 10,000 successful peer-to-peer transactions according to data from the exchange’s own ranking system.
Huobi Global peer-to-peer market advertisement. Source: Huobi
Both Huobi and Binance offer a similar marketplace where users can trade multiple cryptocurrencies including USD Tether (USDT). After converting their fiat to stablecoin, transacting on a regular or derivatives exchange becomes possible.
Asia-based exchanges still dominate spot volume
A complete crackdown on trading from Chinese entities would likely be reflected in the exchanges previously based on the region, like Binance, OKEx, and Huobi. However, looking at the recent volume data, there hadn’t been a meaningful impact.
Weekly spot volume, USD. Source: Cryptorank.io
Take notice of how the three ‘Asia-based’ exchanges remain dominant, while Coinbase, Kraken, and Bitfinex are nowhere near their trading activities.
China’s ban on Bitcoin mining and transactions may have led to some temporary hiccups and a negative impact on BTC price, but the network and price have recovered in a way that is better than many expected.
Currently, there is no way to measure the OTC transactions where larger blocks are traded but it is just a matter of time until these intermediaries find new gateways and payment routes.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Bitcoin (BTC) is being aggressively bought up by institutional entities this week as data shows over-the-counter (OTC) trading volumes spiking.
As noted by Dylan LeClair, co-founder of analytics and advisory firm 21st Paradigm, high net worth individuals have clear interest in Bitcoin at current prices.
Investors ramp up BTC activity
Citing data from on-chain monitoring resource Glassnode, LeClair eyed a sudden uptick in OTC activity just a BTC/USD hit local highs of $40,700.
A classic tandem event, OTC trading increases tend to accompany a BTC price spike.
In May and June following the comedown from those highs, OTC entities bought on temporary price dips. The same phenomenon has occurred throughout the 2021 bull run, even before all-time highs appeared and BTC/USD was still on the way up.
“Big transfer volumes from OTC Desks over the last week,” he commented.
“High net worth individuals & institutions want your Bitcoin.”
While the latest spike was not the largest in terms of volume, data shows impressive flows from major exchanges.
As Cointelegraph reported, around 57,000 BTC left exchanges in a single day Wednesday, while Thursday saw Kraken alone shift a giant 98,000 BTC as buy-ins accelerated across the market.
Despite losing over $400 million on its BTC stash in Q2, meanwhile, MicroStrategy, arguably the king of institutional Bitcoin investors, has already pledged to buy more.
….But lower prices persist
Friday’s price performance may meanwhile precipitate a replay of earlier buying interest.
Related: Bitcoin traders express mixed emotions about what’s next for BTC price
At the time of writing, BTC/USD circled $38,600, having dived 2.7% in an hour as a streak of bearish sentiment entered the market.
While nothing unusual, the volatility highlights the difficulty bulls face in overcoming resistance, be it psychological at $40,000 or technical at $41,000 and above.
Patiently waiting for volatility to kick in on #Bitcoin here.
Stuck in a small range. pic.twitter.com/Xu6ZJgdNaJ
— Michaël van de Poppe (@CryptoMichNL) July 30, 2021
Given the relative lack of volatility over the past 24 hours, however, such a move was broadly expected among traders waiting for a higher low after the trips above $40,000.
As Beijing attempts to regulate and suppress the cryptocurrency boom, traders have been evading regulatory oversight by using over-the-counter, or OTC trading desks.
According to a May 31 report published by Bloomberg, there has been a significant uptick in OTC platform usage since China announced its latest crackdown earlier this month, with China tightening restrictions prohibiting financial institutions and payment companies from providing services related to cryptocurrencies.
While exact volume data is hard to ascertain as Chinese OTC transactions are peer-to-peer and use third-party payment platforms, the exchange rate between China’s yuan and popular stablecoin Tether (USDT is seen as a key gauge of local crypto market sentiment — with demand for USDT increasing during market downturns.
According to Bloomberg, USDT/CNY fell by as much as 4.4% after the Communist Party crackdown earlier this month but has since recouped more than half the loss. The recovery suggests that peak selling may have passed as the markets begin to consolidate.
One of the concerns driving China’s crypto crackdown is capital outflows, which have been seen to spur their latest moves to suppress the industry. Bloomberg speculated that OTC trading may not pose the same capital flight risks associated with typical exchanges, suggesting regulators may not be so heavy-handed in dealing with the sector.
“Because the yuan leg of [OTC] trades takes place entirely within China’s domestic financial system, the risk of large-scale capital outflows is low,” the report noted.
China’s shift to the OTC markets mirrors the situation in late 2017 when the state first imposed a ban on cryptocurrency exchanges. Chinese traders are still believed to represent a major share of global crypto trade today despite the crackdown, with analysts estimating China owned 7% of the world’s Bitcoin and accounted for roughly 80% of trading before the 2017 clampdown.
The latest wave of government-imposed restrictions has also seen
In a market once dominated by a handful of BTC vehicles, there are now a growing number of products offering investors access to gains from popular altcoins like Polkadot.
Yesterday, Osprey Funds announced the launch of the Osprey Polkadot Trust. The fund, which will be available to accredited investors with a $25,000 minimum, is set to be listed on the OTCQX market “as soon as possible,” per a press release from the company. Coinbase will serve as the fund’s custodian.
The fund will give investors access to one of the largest layer one smart contract chains via familiar rails, and joins a growing list of digital assets equity investors can now gain exposure to.
“The appetite for next generation crypto investment vehicles is only increasing,” said Osprey CEO Greg King. “Osprey is just getting started on a series of compelling investment funds that will provide access to some of the most exciting coins and tokens.”
Osprey has positioned itself as a competitor to investment giant Greyscale, which currently offers 14 digital asset investment trusts, per the Greyscale website. Osprey’s OBTC fund boasts a .49% management fee, which they claim makes it the “lowest-cost publicly traded bitcoin fund in the U.S.”
The choice to offer a Polkadot fund may be in an effort to gain an edge on Greyscale. DOT is not among the assets Greyscale offers funds for, and it isn’t part of the “Large Cap” trust despite being the fourth-largest layer one smart contract token by marketcap, meaning Osprey may be catering to a market demand that isn’t presently serviced.
King told Cointelegraph that the decision to offer a DOT fund was part a vote of confidence in the growing ecosystem, as well as an effort to offer a wider range of digital asset investment vehicles.
“Our decision to launch a Polkadot trust next is both a vote of confidence and also addresses the market’s need for access vehicles. We believe Polkadot shows significant promise and is still in the very early stages. Every product we launch will be something the Osprey team has researched and believes is a sustainable crypto project with significant investment potential,” he said.
Polkadot is among the growing number of non-Ethereum chains that have been seeing a spike in organic developer activity. Earlier this month six top ecosystem projects joined together to create an index token, PINT, and Clover Finance made DeFi migration easier with an Ethereum-to-Polkadot bridge.
State Street, the second-oldest operating bank in the United States, is moving into the cryptocurrency industry by agreeing to provide its technology for a new crypto trading platform.
Currenex, a forex technology provider owned by State Street, has entered into an agreement with crypto firm Puremarkets to provide its trading infrastructure and tech for the new crypto trading platform Pure Digital. Announcing the news Thursday, Pure Digital said that it will also collaborate with State Street to further explore the digital currency trading industry.
According to the announcement, Pure Digital will be a fully automated over-the-counter market for digital assets and cryptocurrencies with physical delivery and bank custody. Scheduled for launch in mid-2021, the new platform will reportedly allow institutional investors to trade using bilateral credit and multiple custody solutions. “Trading participants will be free to leverage their preferred digital asset custody solutions and manage risk through a smart custody routing mechanism,” the announcement notes.
State Street announced in late March that the bank has been exploring the role of Bitcoin (BTC) in multi-asset portfolios over the last nine years. “The case has yet to be made for Bitcoin as an equity hedge, though it may be heading in that direction. The key for investors is to combine their preferences for risk mitigation and upside potential with Bitcoin’s expected diversification and return properties to determine their optimal allocation,” the bank wrote.
State Street has been actively exploring the cryptocurrency industry in recent years. In late 2019, the bank announced a digital asset pilot in collaboration with Gemini Trust Company. The pilot built on the research and development in the digital asset space to combine Gemini Custody with State Street’s back-office reporting.
Earlier this year, Bank of New York Mellon announced plans to hold, transfer and issue Bitcoin and other crypto as an asset manager on behalf of its clients.
Alameda has cut ties with Reef Finance while sister company FTX accused Reef of being a scam, tanking REEF token by 26%.
Reef Finance leaked documents revealing that Alameda had threatened to ruin the project by dumping tokens, delisting it, and discrediting it.
It appears that an $80 million business deal fell through due to a miscommunication handled entirely through Telegram with no formal legal contract.
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Days after “investing” $20 million in Reef Finance, Alameda Research refuted all ties with the DeFi project, leveling numerous accusations against it.
Reef Finance, however, reveals a wholly different take. So, what happened?
With screenshots and transcripts now available, the debacle ultimately reveals that $80 million deals are best brokered with legal contracts, not messaging apps.
FTX Denounces Reef as Rug Pull, Alameda Cuts Ties
On Mar. 15, the official Twitter account for FTX accused Reef Finance of being a scam, telling Reef Finance investors that their money was being stolen.
FTX did not respond to Crypto Briefing comment requests and has since deleted the tweet in question.
At around the same time, Alameda trader Sam Trabucco stated that Alameda had no connection to Reef Finance. He characterized the $20 million transaction as an OTC trade rather than a business investment, adding that Reef reneged on their deal and prematurely went to the media about it.
Brian Lee of Alameda’s Venture Capital department retweeted Trabucco’s post.
1. Alameda is not affiliated with REEF.
2. Alameda does not endorse REEF.
3. We agreed to an OTC trade with REEF; they immediately went to the press to brag.
4. They then reneged on the OTC trade.
5. We obviously do not recommend anyone do business with REEF in any way.
— Sam Trabucco (@AlamedaTrabucco) March 15, 2021
The claims from Alameda and FTX directly preceded a 26% drop in the price of REEF. Social media erupted with the news that Reef may be a scam and may have invented the story of an Alameda investment to pump its prices.
However, none of these claims offered the full story.
Crypto Briefing has obtained evidence that an investment announcement was carefully co-ordinated between both projects and released at the agreed time. Brian Lee himself greenlit the announcement, including the disclosure of a $20 million investment, on Mar. 10.
On Mar. 12, the announcement was made.
It appears that Alameda then sold some of their REEF, using the Binance exchange rather than their sister company, the FTX exchange.
An OTC Trade, Not an Investment
Alameda and FTX declined to comment, though Trabucco told Crypto Briefing that Alameda’s blog post on the matter constituted his comments.
In the post, Alameda released conversation transcripts of their own. On Mar. 8, it appears that Alameda brokered a deal for $80 million worth of tokens at a fixed price, settling the first tranche of $20 million.
They agreed to market this OTC trade as an investment in Reef Finance.
Source: Alameda Research
Reef wanted to reframe the trade as an investment for the public, saying, “I assume it is fine with announcing you guys as a big investor, right?”
20% Token Discount Without Vesting
Speaking to Crypto Briefing, Reef Finance CEO Denko Mancheski stated that the token sell-off was unexpected, believing Alameda would lock up their new holdings until further notice.
Reef Finance sources claim that Alameda bought $20 million worth of tokens at a 20% discount and then tried to squeeze the project for more tokens at discounted prices.
“They said that they are investing long term and wanted to buy $80 million,” said Mancheski. “I sent them offers with vesting schedule but they said they are very reputable and long-term investors and professionals and have bought in even bigger projects even bigger amounts without lockups.”
Crypto Briefing has seen no evidence that Alameda agreed to lock up tokens, and Mancheski claimed to no longer have access to the conversation logs where aspects of the deal were discussed.
Mancheski stated that Alameda started selling their tokens on Binance “the moment we settled the $20 million,” further claiming that “they are lying that they still own the majority of the tokens.” It certainly appears that Alameda did indeed move tokens to Binance, although how many were sold is unclear.
Source: Etherscan
“The moment we realized we are getting basically scammed (instead of investing they are lying us and selling the tokens), we decided to stop,” said Mancheski.
This contradicts the quotes posted by Alameda, in which Reef agreed to sell $80 million and merely marketed the transaction as an investment for the public, fully aware that the deal was to broker an $80 million trade in multiple tranches.
Reef shared screenshots indicating that Alameda essentially threatened to ruin Reef Finance.
Threats included to publicly cut ties, dump their holdings and likely impact price, delisting REEF token, and even convincing other exchanges, including Binance, to delist REEF.
The legality of this last threat and of FTX accusing Reef Finance of being a “rug pull” stealing all investor holdings is unclear at this time.
Alameda also told Reef that they had notified their legal department, threatening legal action “should this not settle.”
However, it’s difficult to say to what extent legal action can apply to a deal carried out in such a casual, ad-hoc way by both parties.
An $80 Million Business Agreement on Telegram
At the end of the day, while one could argue both sides are guilty of misrepresenting the truth and carrying out shady business practices, the deal fell apart due to a misunderstanding on both sides.
Alameda was supposed to buy $80 million worth of tokens at a discount, and Reef pulled out when Alameda started to sell earlier than expected.
The most noteworthy aspect of this story is that no formal legal agreement appears to have been written up for a deal worth $80 million.
According to Reef, the entire deal was brokered in good faith and through Telegram messenger, and Alameda representatives refused to comment on whether a legal document was in place.
Likely, the contract Alameda refers to in the Medium blog post was simply the written agreement in which Alameda asked Reef to “pls confirm” that an $80 million transaction was on the table. Sometimes written agreements hold up in court, and sometimes they don’t.
“There is literally nothing they can do legally since there was no paperwork,” Mancheski bluntly told Crypto Briefing.
In traditional finance, brokering a deal of this size with no formal legal contract would be unheard of.
In crypto, it’s business as usual.
This news was brought to you by ANKR, our preferred DeFi Partner.
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At least one key executive from crypto exchange Huobi is now in custody with Chinese police due to an investigation related to the exchange’s over-the-counter (OTC) trading service, multiple sources have told CoinDesk, giving more credence to rumors that have been circulating on Chinese social media.
The two people, including COO Jiawei Zhu, were taken by the police in November and December 2020, respectively. Trading on the exchange is not affected because the police are investigating a case related to the Huobi’s separate OTC trading business, said these sources, which include former employees close to Huobi’s core team members and industry executives with direct knowledge about the matter.
Zhu was taken by local police during a company trip in the city of Zunyi in South China’s Guizhou province in November. He is currently still in custody, according to the sources.
CoinDesk first asked Huobi to confirm details in the story on Jan. 15. The exchange had not provided comments as of press time.
Zhu was assisting the police with an investigation, according to a report by Chinese publication The Paper, dated Nov. 30. The police did not take coercive measures to make Zhu cooperate, and the situation is similar to OKEx founder Star Xu’s case, the report indicated. No further details regarding Zhu’s detention in November are provided in the report.
The other person, who is one of the managers in charge of Huobi’s OTC trading services, was detained in December but was released recently by the police, according to one former employee.
It remains unclear whether the local police also put in custody the exchange’s co-founder, Lin Li, during the trip. Li might have been assisting the police with investigations, according to the sources. “Few people know Li’s whereabouts nowadays,” one source said.
Huobi Tech, the Hong Kong-based public company acquired by Li through a reverse takeover, has yet to file any disclosure related to the incident with the Hong Kong Exchange, indicating Li is not facing any criminal charges.
A number of Huobi’s current employees across different departments including trading, finance and legal have been interviewed by the police to assist the investigation. But the police have not been able to bring in more people for questioning because a large part of the exchange’s operations is decentralized, one former employee said.
“Three of their key people are in prison,” Su Zhu, CEO of Singapore-based crypto investment firm Three Arrows, said of the investigation about Huobi in a Dec. 12 podcast. Zhu later clarified to CoinDesk about his comment on the podcast saying that he meant people were in custody rather than in jail and he is not certain why they are in custody.
Huobi came on the police’s radar, in part, because of a particular investigation in 2018, which is also related to major exchange OKEx’s OTC trading services, one former employee said.
The current investigation appears to be focused on potential financial crimes conducted through the exchange’s OTC trading services, including online gambling, two former employees said.
The investigation is related to a particular case the Shanxi local police have been working on, three of the sources said. It was the local police from Shanxi province who were trying to find Huobi’s key executives while they were on the trip in Zunyi, according to two of the sources.
The investigation took place at a time when local police in Shanxi province were ratcheting up their anti-corruption campaign and tightening surveillance over financial transactions via a variety of platforms, according to the sources.
Despite Huobi’s fairly close relationship with the Chinese government, the exchange was not exempt from the investigation because the case is politically sensitive, the sources said.
As one of the largest crypto exchanges founded in China, Huobi has been working with the Chinese government to develop blockchain technology. It has jointly launched multiple blockchain initiatives with the Chinese government and has a Communist Party committee setup in Beijing Lianhuo Information Services Company in 2018, which is one of its subsidiaries based in the city.
Star Xu, the OKEx founder, was reportedly held in custody in October to assist the Chinese police with an investigation. The rumors that Huobi’s executives were taken by the police emerged on Chinese social media in November shortly after the trip. A Huobi spokesperson at the time denied the rumors in an interview with CoinDesk.
The Chinese police appear to have intensified their crackdown on crypto exchanges’ OTC trading services in the last year.
Zhao Dong, one of the most prominent OTC traders in China and co-founder of crypto lending platform RenrenBit, was taken by the Chinese police to assist its investigations in July 2020.
OTC trading has become one of the major channels for Chinese crypto investors and miners to find counterparties and process trade orders since the People’s Bank of China, which is the country’s central bank, started to clamp down on crypto trading on centralized exchanges in September 2017.
Such trading tends to be difficult for Chinese authorities to trace, and is less strict about Know-Your-Customer (KYC) and Anti-Money-Laundering (AML) compliance, compared to trading on centralized exchanges.
Read More: Huobi Guarantees Normal Operations During OKEx’s Suspension of Crypto Withdrawals
One of the reasons Huobi has yet to inform its customers of any information related to the incident is that, unlike OKEx, the exchange’s private keys to its crypto wallets are held by multiple people. Thus, Huobi can still process withdrawals, the sources said.
OKEx, by contrast, informed its customers the exchange would be suspending withdrawals because the private key holder was assisting an investigation with the Chinese public security bureau and could not be reached at that moment. The exchange resumed withdrawals on Nov. 26, five weeks after the suspension.
Despite bitcoin trading near all-time highs, more institutions continue to buy bitcoin, and they’re using over-the-counter (OTC) trading firms to keep their purchases from impacting the overall market.
Unlike retail investors or smaller institutions that use crypto exchanges, large institutions usually trade bitcoin through the OTC market, noted John Todaro, director of institutional research at cryptocurrency analysis firm TradeBlock. That way, their transactions won’t move prices the way they would had the investors used even the largest centralized exchanges.
One reason that’s the case is OTC transactions are also much more opaque compared with trades on exchanges. Without transparent data on OTC transactions, it is difficult to track or gauge this side of the crypto market.
However, three different metrics monitored by blockchain analytics firm CryptoQuant provide an idea of what’s happening in the crypto OTC market and could give clues that in the coming weeks and months, more large institutions may come out to disclose their bitcoin positions.
The total amount of bitcoin transferred out from Coinbase Pro wallets since September 2020.
Source: CryptoQuant
When a massive bitcoin outflow takes place on Coinbase Pro, it tends to go to Coinbase’s own cold wallets for custody that hold 6,000-8,000 BTC, according to Ki Young Jun, chief executive of CryptoQuant.
“We only know it’s not going to hot wallets [because] we have their address labels,” Ki added. “Exchange users withdrawals can happen, but I would say 99% of big single transactions over 5,000 bitcoin are either internal transfers or going to custody wallets.”
For example, a closer look at the spike in bitcoin outflow that took place on Dec. 12 shows that between 8,000 and 15,000 BTC were moved out of Coinbase Pro to other cold wallets, an implication of OTC deals, Ki said.
Coinbase Custody is directly integrated with Coinbase’s OTC desk, meaning that its clients can leverage the OTC desk without having to move funds out of cold storage.
Read More:Coinbase Completes First OTC Crypto Trade Directly From ‘Cold’ Storage
Both MicroStrategy and British investment firm Ruffer have revealed that their purchases of hundreds of millions of dollars worth of bitcoin were facilitated by Coinbase.
Read More:Ruffer Investment Used Coinbase to Execute $745M Bitcoin Buy
Fund flow ratio for all crypto exchanges since 2018.
Source: CryptoQuant
Another metric, the fund flow ratio for all exchanges, has gone down since the market sell-off in March. This is the ratio of network transaction volume of exchanges compared to the entire cryptocurrency transferred on the network. A lower number means fewer transactions that are done on exchanges and are instead conducted outside exchanges such as over-the-counter.
Notably, the last time the fund flow ratio was at the current level (approximately 5%) was when major crypto exchanges launched their OTC desks in early 2019.
Read More:Bittrex Launches OTC Trading Desk With 200 Cryptocurrencies
The number of bitcoin transferred on the network since January 2020.
Source: CryptoQuant
The third metric, the total amount of bitcoin transferred on the blockchain, has continued growing. This, coupled with the decreased fund flow ratio, indicates that potential massive OTC deals from the likes of institutions are “ongoing,” Ki said.
“What we’re seeing is an entire class of investors who are new to the crypto market and want to establish positions,” Matthew Hougan, chief investment officer at Bitwise Asset Management, told CoinDesk. “They are not so much buying the dip as simply buying, consistently and over time.”
