Bitcoin transaction volume is rapidly moving off of exchanges, which is a positive sign that indicates the market is beginning to mature as it becomes driven less by speculative trading and more by long-term investing and real-world utilization.
It is important to note that the decline in transactions taking place on exchanges also seems to indicate a surge in the number of over-the-counter trades being conducted by investors, which is a positive sign that points to an influx of large buyers into the market.
This could be a positive sign that bolsters the mid-term outlook of the market, suggesting that it may be seeing major inflows of fresh capital, despite BTC’s lackluster performance as of late.
It is important to note that its recent price decline has not come about due to any underlying weakness, but rather due to the turbulence seen in the stock market.
This has caused investors to grow jittery, which has adversely impacted volatile assets like Bitcoin.
Exchanges Lose Their Dominance Over Market Activity
NewsBTC reported earlier this week that exchanges now account for 20% of miner revenue, marking a drastic decline from where this same metric was in 2018.
According to analytics platform Glassnode, exchange fee dominance hit peaks of 41% in 2018, and it has been declining ever since.
“On-chain Exchange Fee Dominance shows the major role that centralized exchanges play in the Bitcoin ecosystem. 20% of all miner fees are currently used for BTC txs involving exchange activity. In 2018 after BTC peaked, this number was as high as 41%.”
Image Courtesy of Glassnode.
This decline seems to indicate that more transaction volume is moving off of exchanges, likely taking place between individuals, businesses, and OTC traders.
CryptoQuant CEO: BTC Possibly Seeing a Spike in OTC Transaction Volume
While speaking about the data above regarding the medium upon which Bitcoin transactions are taking place, CryptoQuant CEO Ki Young Ju explained that he believes this may point to a rise in OTC trading volume.
“The number of BTC transferred hits the year-high, and those TXs are not from exchanges. Fund Flow Ratio of all exchanges hits the year-low. Something’s happening. Possibly OTC deals… This also happened in Feb 2019, when OTC volume was skyrocketed. I think this is a strong bullish signal.”
Image Courtesy of Ki Young Ju. Charts via CryptoQuant.
If OTC trading activity is on the rise, it may indicate that Bitcoin is seeing large inflows of capital from wealthy investors. This could be a positive sign for its near-term outlook.
Featured image from Unsplash.