The “50k” is not yet dry. But over-the-counter Bitcoin trading is flourishing – and so is the hash rate. The market update.
When the Bitcoin exchange rate (BTC) regained USD 50,000 on August 23, there was “extreme greed” among investors. True to the motto: “Be afraid when others are greedy.” This resulted in profit-taking, which pushed BTC back below the psychologically important “50k”.
Bitcoin evangelist Michael Saylor used the dip to top up Microstrategy’s enormous BTC reserve by an additional 3,907 BTC. The IT company now holds 108,992 BTC in its Bitcoin war chest. At press time, these are worth approximately $ 5.2 billion.
Bitcoin: OTC trading is increasing
Institutional investors typically buy Bitcoin over the counter (OTC). For example, Microstrategy uses Coinbase’s OTC trading desk for its bulk Bitcoin purchases. There, an order is broken down into many small parts that are executed at different trading venues. This minimizes the impact of the trade on the market by helping to obscure the overall size of the order.
As can be seen from the data from the crypto analysis platform Cryptoquant, the share of OTC deals in the Bitcoin market has increased significantly in recent months. The “Fund Flow Ratio” describes the ratio of BTC transfers, in which Exchanges are involved, to BTC transfers in the entire network. An increase in the number indicates greater market volatility, while a falling value suggests an increase in OTC transactions. On August 24, the fund flow ratio for BTC reached its lowest value since data collection began in September 2020.
The increase in OTC deals suggests growing Bitcoin exposure by institutional investors. But the “Instis” are no longer limited to BTC, as data from the crypto hedge fund manager Coinshares show, for example.
Hash rate continues to recover
Nonetheless, BTC is the de facto reserve currency in the crypto market, which is still 44 percent dominated by Bitcoin. If Bitcoin is doing well, the Altcoins usually also benefit. An important metric for the “health” of Bitcoin is the hash rate. It shows how much computing power is used to secure the Bitcoin network. When China – for a long time the undisputed mining world champion – massively tightened the thumbscrews for BTC miners in the Middle Kingdom in the spring, this was reflected in a crash in the BTC hash rate. But the hash rate has recovered noticeably since the annual low at the beginning of July.
Bitcoin thus remains by far the most secure proof-of-work network – the basic requirement for the excellent value storage function of BTC. So that BTC can better fulfill its originally intended use of digital peer-to-peer cash, work is feverishly on the second network level, the Lightning Network. There has also been bullish news from this front recently.