In the second half of 2018, there was a large influx of institutional investors into the crypto space, but this positive development did not result in price appreciation of crypto assets. Why? Majority of their trades were done over-the-counter (OTC) as such, the trades were hidden from the public eyes since these types of trades are not recorded on exchanges’ public order book.
These influx of funds into the crypto market was carried by many news portals and market players anticipated. However, the market did not move proportionally. These institutions mostly purchased their coins from the OTC market and this does not cause price movement of cryptocurrencies. It is suspected that after the OTC purchase, they then dump the coins on exchanges, consequently causing prices drops as witnessed.
Observers will notice that trade volumes seemed to be on the decline despite the influx of institutional monies. In actual fact, there was more trade happening, but majority of them were not being recorded on the public order books.
The crypto exchanges have not helped matters in the sense that they have also started opening up options for OTC trades of top crypto coins for institutional investors as a way to draw in large funds, but they lose sight of the fact that this trading option does not really create a positive outlook for the market. For example, Circle traded $24 billion in its OTC market for 2018, but was there a corresponding price appreciation? None – $24 billion should make a significant dent in a market which is only a little over $100 billion in market capitalization.
It is high-time exchanges found a way to reduce OTC service offerings and provide more secure open-market trades or they could alternatively find a way to have OTC trades recorded in the public order books whiles helping to ensure high-level privacy at the same time.