Coinbase Prime has seen a significant increase in over-the-counter (OTC) trading activity, indicating a rise in institutional investors utilizing OTC channels to accumulate bitcoin, according to CryptoQuant analysts.
"When there is a significant increase in inflows to the Coinbase Prime Brokerage Service, the preferred bitcoin purchase channel for U.S. institutions, it suggests that multiple over-the-counter (OTC) trades are currently taking place, and institutions prefer to accumulate bitcoin through OTC trading," CryptoQuant CEO Ki Young Ju said.
CryptoQuant’s data reveals that this spike in inflows mirrors a similar trend observed when bitcoin approached its all-time high of over $108,000 on Dec. 17. The sharp rise in USD inflows into Coinbase Prime suggests that institutional demand for bitcoin is once again on the rise.
Coinbase Prime inflows show a sharp increase in USD inflows. Image: CryptoQuant.
CryptoQuant Head of Research Julio Moreno clarified that the inflows primarily represent bitcoin sourced from Coinbase for institutional clients.
"As such, it is mostly interpreted as bitcoin being purchased by institutions or large buyers," he said, noting that OTC flows recently reached $14 billion, or approximately 142,000 bitcoin on the U.S.-based centralized exchange.
Moreno also highlighted a connection between the recent surge in OTC flows and increased bitcoin purchases through spot exchange-traded funds (ETFs), many of which source their bitcoin from Coinbase. This growing demand suggests growing institutional interest in the largest digital asset by market capitalization.
CF Benchmarks researchers have also observed a shift in the bitcoin market's volatility dynamics, particularly in the options market. Implied volatility (IV) for long-dated out-of-the-money (OTM) calls on the CME has risen significantly, marking a departure from recent weeks when puts were more actively traded.
"Bitcoin has recently come up over the $100,000 level from the low $90,000s, whenever the market turns bullish we tend to see more appetite for the deep OTM calls to capture the potential upside," CF Benchmarks Research Analyst Mark Pilipczuk told The Block.
Pilipczuk also pointed out that news reports suggesting that potential executive orders from President-elect Donald Trump targeting the crypto industry have contributed to recent price fluctuations.
"There is anticipation that Trump has a number of day 1 executive orders lined up that will specifically target the crypto industry," Pilipczuk said. "We saw price respond shortly after these news stories broke, notably in the last two days the IV for the shortest expiry 5 delta puts fell. Its likely that demand for downside hedging decreased as potential favorable regulatory changes get closer."
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