Coinbase Prime Sees OTC Bitcoin Demand Surge Amid Institutional Interest

Coinbase Prime, the institutional arm of the leading U.S. cryptocurrency exchange, is witnessing a notable uptick in over-the-counter (OTC) Bitcoin trading activity. This surge, according to analysts at CryptoQuant, suggests that institutional investors are increasingly utilizing OTC channels to accumulate Bitcoin, often seen as a quieter, more discreet way to make large purchases.

Decoding the Surge: Why Are Institutions Choosing OTC?

"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," explained CryptoQuant CEO Ki Young Ju.

CryptoQuant's data reveals a spike in U.S. dollar inflows into Coinbase Prime, mirroring a similar trend observed when Bitcoin approached its all-time high of over $108,000 on December 17. This surge in inflows indicates that institutional demand for Bitcoin is once again on the rise.

The ETF Connection: A Broader Trend of Institutional Interest

CryptoQuant Head of Research Julio Moreno clarified that these 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 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 a broader trend of increasing institutional interest in the largest digital asset by market capitalization.

Options Market Hints at Bullish Sentiment

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 (Chicago Mercantile Exchange) has risen significantly. This marks a departure from recent weeks when puts were more actively traded, suggesting a potential shift towards bullish sentiment among institutional investors. A call option gives the buyer the right to purchase the underlying asset (in this case, Bitcoin) at a predetermined price in the future, while a put option grants the right to sell. An increase in demand for out-of-the-money calls could indicate that these investors expect significant price appreciation.