Bitcoin OTC Desk Balances Reach 2.5-Year High, Signaling Liquidity Trends Ahead of Potential Q4 Rally

The balance of bitcoin on over-the-counter (OTC) desks has hit a 2.5-year high, reaching 410,000 tokens. This trend is similar to what we saw during the bull run from late 2020 to early 2021. To keep this recent bullish momentum going, we might need to see a decline in bitcoin balances.

One possible challenge to the expected "Uptober" and a general rally for bitcoin (BTC) in the fourth quarter is the recent surge of tokens moving to OTC desks. Data from CryptoQuant shows that there are now over 410,000 bitcoins on these desks. That’s the highest level since May 2022 and more than double the 185,000 seen back in March.

This OTC balance gives us a glimpse into the liquidity available for trading. A high balance indicates strong liquidity, meaning trading desks can handle large orders effectively. On the other hand, a lower balance might make it harder to execute trades smoothly.

Who typically uses OTC desks? They mainly serve high-net-worth individuals and institutions. By trading OTC, they can make sizable purchases and sales without impacting the price of bitcoin on regular exchanges.

Recent data shows that the OTC balance has increased significantly over the past six months. This rise coincides with bitcoin's price moving downward from its all-time high of over $73,500 in March. The uptick in balances is quite similar to what we saw in late 2020 and early 2021 when the OTC balance climbed from 235,000 to 435,000 tokens in just six months. However, back then, bitcoin's price was on the rise, unlike the modest decline we see now.

During the bear market of 2022, the OTC balance dropped along with bitcoin's price, indicating net buying activity. If bitcoin is going to continue its bullish trend into the fourth quarter, a drop in OTC desk balances may be a crucial factor to watch.