Bitcoin continues to recover from China FUD, OTC deals at yearly highs

The “50k” is not yet in the bag. But over-the-counter bitcoin trading is thriving – and so is the hash rate. The Market Update.

When the Bitcoin (BTC) exchange rate

recaptured $50,000 on August 23, there was “extreme greed” among investors. Loosely based on the motto, “Be fearful when others are greedy.” Thus, profit-taking ensued, pushing BTC back below the psychologically important “50k”.
Bitcoin continues to recover from China FUD, OTC deals at yearly highsBitcoin continues to recover from China FUD, OTC deals at yearly highsBitcoin continues to recover from China FUD, OTC deals at yearly highsAlternative.me’s Fear & Greed Index

Bitcoin evangelist Michael Saylor used the dip to add

another 3,907 BTC to Microstrategy’s enormous BTC reserve. The IT company now holds 108,992 BTC in its Bitcoin war chest. As of press time, these have an equivalent value of around USD 5.2 billion.

Bitcoin: OTC trading on the rise

Typically,

institutional investors buy Bitcoin in over-the-counter (OTC) trading. Microstrategy, for example, uses Coinbase

‘s OTC trading desk for its large-scale bitcoin purchases. There, an order is broken down into many small pieces that are executed on different trading desks. This minimizes the impact of the trade on the market by helping to disguise the overall size of the order.

As shown in data from crypto analytics 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 involving exchanges to BTC transfers across the entire network. An increase in the number indicates greater market volatility, while a decrease indicates an increase in OTC trades. On August 24, the fund flow ratio for BTC reached its lowest value since data collection began in September 2020.

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Bitcoin continues to recover from China FUD, OTC deals at yearly highsBitcoin continues to recover from China FUD, OTC deals at yearly highs <img src=”https://www.btc-echo.de/wp-content/uploads/2021/08/image-42-920×367.png 920w, https://www.btc-echo.de/wp-content/uploads/2021/08/image-42-741×296.png 741w, https://www.btc-echo.de/wp-content/uploads/2021/08/image-42-768×307.png 768w, https://www.btc-echo.de/wp-content/uploads/2021/08/image-42.png 1473w” alt=” height=”367″ width=”920″ />BTC fund flow ratio at record low. Source: CryptoQuant

The increase in OTC deals suggests growing bitcoin exposure by institutional investors. But the “instis” are no longer limited to BTC, as data from crypto hedge fund manager Coinshares shows, for example.

Hash rate continues to recover

Nonetheless, BTC is the de facto lead currency in the crypto market, which is still 44 percent dominated by Bitcoin. When Bitcoin does well, altcoins usually benefit as well. An important metric for Bitcoin’s “health” is the hash rate. It indicates how much computing power is being used to back up the Bitcoin network. When China – long the undisputed mining world champion – massively tightened the thumbscrews on BTC miners in the Middle Kingdom in the spring, this was reflected in a crash of the BTC hash rate. However, since the low for the year in early July, the hash rate has recovered noticeably.

Bitcoin continues to recover from China FUD, OTC deals at yearly highsBitcoin continues to recover from China FUD, OTC deals at yearly highsBitcoin continues to recover from China FUD, OTC deals at yearly highsBitcoin: Hash Rate on the road to recovery (7-day average). Source: Blockchain.com

This means that Bitcoin remains by far the most secure proof-of-work network – the basic prerequisite for BTC’s excellent value storage function. In order for BTC to better serve its original intended use of digital peer-to-peer cash, work is feverishly underway on the second network layer, the Lightning Network. There has also been bullish news from this front recently.