📈📉 All this OTC Bitcoin buying may backfire on all of us 📈📉

Lately news stories are popping up describing how the Bitcoin OTC markets are flourishing and how billions of dollars worth of Bitcoin are traded on these trades. At first glance it sounds as if institutional money and whales are buying in. But is this really good for the rest of us hodlers?

OTC TRADING

OTC trading stands for, as far as I know, Over-the-Counter trading and it essentially means that two parties exchange goods between eachother without going through a (stock) market or other financial instrument. OTC Trading functions like a seperate market, because the buying and selling of these trades does not influence the price on the exchanges. After all, in order for the price to go up, the prices on the exchanges must rise and this only happens when people buy up the existing sell orders on those exchanges.

OTC trading is interesting precisely because it is a seperate market. It allows huge amounts of value to be transferred without altering the price. This is important when you want to buy up billions of dollars worth of Bitcoin, but don't want to end up overpaying because your own buying is driving the price up. Other whales might accummulate over time, but you could also simply find another party who owns vast amounts of Bitcoin and offer to buy it off of them.

Similarly for the selling party a similar incentive exists: If you want to liquidate a billion dollars worth of Bitcoin, you don't want the price to drop before you're done selling or else you're not going to get your billion dollars.

For as long as the crypto markets don't have enough liquidity to handle these huge orders, the OTC market offers a solution.

COULD BE TROUBLE

While many people seem excited about the news that big money is buying into Bitcoin and cryptocurrency in general, I have my concerns and big ones at that.

The question that arises in my mind is: Why would anybody want to buy a billion dollars worth of Bitcoin, without raising the price?

Surely the above explanation that I offered sounds sensible: you don't want to overpay. But on the other hand, if you buy and hodl Bitcoin as an investment, you kind of want the price to go up too don't you?

I can think of one more reason why somebody would want to buy and own a vast amount of Bitcoin off-markets, and it's because somebody might be interested in crashing the price. Think about it: If you want to destroy or manipulate the Bitcoin price, first you have to own Bitcoin in order to dump it. This is where the OTC markets come in, and where the dumping whale could buy in from. Now, with a billion dollars worth of Bitcoin at their disposal it becomes possible to create a billion dollars worth of sell pressure at precisely the right critical moments to crash the markets.

Perhaps you've heard of George Soros and his tactics of destroying markets for profit (he 'broke' the English pound in 1992), and how they are looking at getting into cryptocurrencies. And I do believe that this would fit in well with the tactics the likes of him would employ: First crash the price down as low as you can, and then buy it all up eventually for dirt cheap low prices.

I'm only speculating and I'm not saying this is necessarily what's going. I would be wary of getting too excited over big money getting in, though. They are experts at this and have more money and patience than 90% of the hodlers and believers out there. Of course I will still continue to hodl regardless of how long this bear market may last, including the additional institutional sell pressure. I've got the time and patience for it.

In other short news: I've been super busy this past week with my job, so I couldn't write any posts. I promise to write more again this week though!!

(Art by Roy Lichtenstein)