On-chain data signals increasing Bitcoin activity — But there’s a catch

On-chain data signals increasing Bitcoin activity — But there’s a catch

According to CryptoQuant CEO Ki Young-Ju, over-the-counter (OTC) (BTC) deals might be occurring in a way that is similar to the pattern seen in February 2019. According to the on-chain analyst, this is historically a bullish sign but Ki Young-Ju cautious that the pattern is not ‘absolute’ and should not be relied on in isolation.

Ki also noted that the number of Bitcoin transfers achieved a new yearly high and that these transactions didn’t come from exchanges. Based on two on-chain metrics, he explained it could be a resurgence of OTC volume. He said:

High net-worth individual buyers and miners often buy or sell Bitcoin in the OTC market. This allows BTC to exchange hands without placing significant pressure on the exchange market.

Rafael Schultze-Kraft, the CTO of Glassnode, said the increase in volume is not BTC changing hands. Instead, the analyst said that the volume is flat and it represents “change BTC.” He wrote:

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“Bitcoin on-chain volume is NOT increasing or hitting any highs. Even by applying the most basic change-adjustments uncovers that the increase in volume is just “obvious change” moving back to the sender. This is not $BTC changing hands, and not real economic throughput… Just wanted to point out that this is not the case, volume is in fact flat – these are just huge amounts of change BTC.”

Rather than OTC deals, it could represent internal transfers or other types of internal wallet movements. In that case, it would not necessarily be a bullish trend for Bitcoin in the near term.

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In response, Ki explained that the trends still seem like OTC deals. He referred to the spikes in transaction volume in February 2019. After the two peaks in volume, Bitcoin eventually recovered strongly from the $4,000 area. Ki added:

If the spikes in Bitcoin volume are OTC deals, then it is an optimistic trend that indicates the possible start of an accumulation phase.

Since miners tend to sell BTC in the OTC market, many OTC deals involve miners selling BTC and whales buying the mined BTC. Such a cycle reduces the amount of BTC that would otherwise be sold on exchanges and also decreases selling pressure.

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

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