Does Over-the-Counter Bitcoin Trading Impact its Price?

Bitcoin enthusiasts are no stranger to the fact that the cryptocurrency has been unable to maintain its levels of near US$20,000 since December 2017.

Since its high of US$19,535.70 on December 16, bitcoin has significantly dropped by 65.9 percent and has largely been unable to sustain levels even close to US$10,000. In fact, the digital currency dropped to as low as under US$6,200 on June 13 — its lowest price target since February — and has largely hovered between $6,200 and $6,700 since then.

Case in point, as of 4:25 p.m. EST on Monday (June 18), bitcoin was valued at US$6,721.68 which is a 2.77 percent increase over a 24-hour period, but is still far from its status in late 2017. Its drastic decline over the last six months or so has lead to questions about why it’s dropped so much and if there will be a recovery–with one expert saying over-the-counter (OTC) desks are one reason as to its fluctuating price.

David Drake, LDJ Capital founder and chairman told the Investing News Network in a telephone interview that the rising number of OTC desks has been one catalyst as to why bitcoin’s price has struggled.

“One of them can easily manipulate the [bitcoin] price and push it down,” Drake said, explaining that there are now over 100 OTC desks when there used to be only six major desks.

A cryptocurrency OTC desk is described as trading that’s done separate from digital currency exchanges and is largely conducted by hedge funds, private wealth managers, or high-net-worth people. That being said, OTC markets are only available to SEC-registered and FINRA-approved broker-dealers.

Still, Drake said that OTC desks are taking pressure off traditional digital currency exchanges with trades being done peer-to-peer.

“[OTC desks] don’t want to put pressure on the exchanges [and] on the pricing, so [trading is] done off the books or off the exchanges,” he said.

Drake continued by saying there’s a lot of market manipulation and that the OTC has not gone after insider trading–but that they will. He said that hopefully that will start happening towards the end of the year or potentially by early 2019.

In terms of the future outlook for bitcoin’s price, Drake said that he doesn’t expect to reach anywhere near the US$25,000 level, but that it could potentially find the US$12,000-US$15,000 levels again.

“Prices go up and down 20-to-40 percent, sometimes every week for the last 12 months, and that will not stop,” he added.

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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article. 

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.