Any observant crypto trader and/or analyst can easily identify September 5th as the date the crypto markets turned for the worst after the fake news that Goldman Sachs had abandoned plans for a crypto trading desk. Before this date, Bitcoin (BTC) was comfortably trading above $7,300. But since then, the King of Crypto has fallen continuously to current levels of $3,400. Current levels look set to retest last year’s low of $3,200 if the trading volume does not increase in the next few hours.
Over-the-Counter Trading Desks Start Appearing
In the last six months or so, there has been a proliferation of crypto exchanges offering Over-the-Counter (OTC) trading desks for their Institutional clients, High Net Worth Individuals and the traditional whales willing to cash out or buy in using large amounts of capital. These services have provided a new avenue for large crypto transactions to happen that are hidden from the regular trader like you and I. If performed on regular exchanges, these transactions would grossly affect the price of Bitcoin and all our favorite cryptocurrencies.
OTC Trading Is Not Recorded on Public Order Books
Unbeknownst to many crypto traders is that all the trading being down Over the counter, is not recorded on the public order books seen on exchanges. This fact can be found in the recent announcement by Binance when it opened its own OTC trading desk. The team at the exchange notified would-be customers that the service will keep their trades private:
Your trades are private because the order books will not be touched.
Reiterating the earlier observation, OTC trading desks have given an alternative avenue for large crypto transactions to take place away from the order books seen on regular crypto exchanges. Without the OTC trading desks, these trades would significantly boost the trade volume as recorded on Coinmarketcap.com and other tracking websites. High trade volume recorded on exchanges corresponds to a demand for BTC and other cryptocurrencies.
Crypto Trading Volume On the Decline
In a recent tweet, veteran Bitcoin analyst, Willy Woo, noted that the trade volume of BTC has been on a constant decline for the past few months. More volume is needed to keep BTC and other cryptos at their current value. His tweet can be found below.
Today is D-Day for down-trend confirmation. We need to see more volume build upon yesterday. (Chart shows 2.5hrs of traded volume so far for today). Technically we broke the volume trend line yesterday, but I'd like to see one more day of higher volumes for confirmation. pic.twitter.com/dFE9KYEKXz
— Willy Woo (@woonomic) January 29, 2019
The increase of crypto exchanges offering OTC trading desks has also coincided with the decline of BTC trade volume reported on public order books. By taking away ‘trading action’ from regular exchanges with public order books, OTC desks have contributed to the declining value of Bitcoin. Evidence of this can be seen in a recent report that crypto giant Circle, had traded $24 Billion in BTC and altcoins in 2018 through its Over the Counter services.
What are your thoughts on the theory that OTC trading desks have contributed to the depletion of trade volume as reported on public order books? Without trade volume, the value of BTC and other cryptos continue to fall. Does this theory hold water? Please let us know in the comment section below.
[Image courtesy of Unsplash.com]
Disclaimer: This article is not meant to give financial advice. Any additional opinion herein is purely the author’s and does not represent the opinion of Ethereum World News or any of its other writers. Please carry out your own research before investing in any of the numerous cryptocurrencies available. Thank you.
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