There’s A Catch As The On-Chain Data Signals Increasing Bitcoin Activity

Where Is Bitcoin Headed? 

Hinting that there may be a rise in over-the-counter BTC orders, recent on-chain data shows a spike in Bitcoin transfers. 

Over -the-counter Bitcoin deals might be occurring in a way that is similar to the pattern seen in February 2019 according to CryptoQuant CEO, Ki Young-Ju. While Ki Young-Ju is cautious that the pattern is not absolute and should not be relied on in isolation, according to the on-chain analyst this is historically a bullish sign. 

These transactions didn’t come from exchanges, as Ki noted that the number of Bitcoin transfers achieved a new yearly high. He explained it could be a resurgence of OTC volume based on tow on-chain metrics. Furthermore, he said, 

Hitting the year-high is the number of BTC transferred whereas those TXs are not from exchanges. Hitting the year-low is the fund flow ratio of all exchanges. Here something is happening as possibly OTC deals are happening in Feb 2019, where the OTC volumes had skyrocketed thinking it as a strong bullish signal. 

Often buying or selling bitcoin in the OTC market are high net-worth individual buyers and miners. Without placing significant pressure on the exchange market this allows BTC to exchange hands. 

There is a catch to the data

Noting that the increase in volume is not BTC changing hands, according to Rafael Schultze-Kraft the CTO of Glass node. The analyst said that the volume is flat as it represents change BTC instead. Further explaining he wrote,

Not increasing or hitting any highs is the bitcoin on-chain volume. The increase in volume is just an obvious change moving back the sender even by applying the most basic change adjustments that uncover that. It is not real economic throughput as also not $BTC changing hands. These are just huge amounts of change BTC as he just wanted to point out that this is not the case where volume is in fact flat.

Here we find that possibly it could represent internal transfers as also other types of internal wallet movements as they are rather than OTC deals. For most, it would not necessarily be a bullish trend whereas for Bitcoin in the near term it is in that case. 

Ki explained that the trends still seem like OTC deals in response. He was found referring to the spikes in transaction volume in February 2019. Bitcoin eventually recovered strongly from the $4,000 area after the two peaks in volume. He then added that 

Moving their funds by evoking multiple transactions, OTC tx is just one of the possibilities as the point is just the non-exchange/non-miner entities. 

What does it mean for Bitcoin?

It is an optimistic trend that indicates the possible start of an accumulation phase if the spikes in Bitcoin volume are OTC deals. 

Many OTC deals involve miners selling BTC and whales buying the mined BTC since miners tend to sell BTC in the OTC market. That would otherwise be sold on exchanges and also decreases selling pressure are such a cycle reducing the amount of BTC. 

It is most likely a non-event for Bitcoin if the rising transaction activity does not pertain to OTC deals. 

With Only 3.6% Coming From The Exchanges Bitcoin On-Chain Volume Is Set To Hit A 1-Year High

The fact is that the bitcoin exchange trading volume has not declined yet. 

Ultimately hitting a 1-year high of 3.2 million BTC on September 9, bitcoin’s on-chain transfer volume grew considerably over the past month. Only 3.6% or 115,000 BTC were transacted via trading platforms on the day at the same time visible on-chain exchange activity has been dropping. 

As trading on centralised exchanges almost always happens off-chain if anything, it has gone up as this does not necessarily mean that the exchange trading volume has declined. 

When users deposit or withdraw funds, most on-chain activity is registered on centralised exchanges. Users are choosing to move their assets back and forth less often as the trend may actually indicate. 

It may stem from greater adoption of the asset in the economy since the growth of bitcoin’s on-chain transfer volume is likely not caused by the exchange activity. When it appeared to spike to almost 25 million BTC, was the last time this metric was higher on August 21, 2020. As we have no way of knowing exactly what caused it, this seems to have been anomalous though. 

Winding Up The Topic Here 

With these facts, we close the article on the movement of Bitcoin in the market. We promise to bring you more on the latest news on the bitcoin market. Stay tuned for more.