OTC desks report renewed interest in bitcoin and ether, less interest in DeFi tokens

The attention of over-the-counter (OTC) crypto traders is moving away from DeFi tokens and back to large-cap cryptocurrencies, according to several industry insiders. 

Over the course of the last five trading days, bitcoin has climbed more than 5% to nearly $11,400 at the time of this writing. It's been a similar story for Ether. The token has appreciated nearly 8% over the same period, trading above $377.

OTC trading sources say that last week's news that Square has added $50 million worth of bitcoin to its balance sheet is behind the bullish sentiment driving the largest cryptocurrency higher.

"It's unbelievable," said one trading executive. "We've had massive buy-side demand in bitcoin all of the last week."

Charles McGarraugh, global head of markets at Blockchain, said that it seems that Square news has made traders more bullish on bitcoin. "The idea is that others will follow," he said in a Telegram message.

Galaxy Digital highlighted the Square purchase in a note to counterparties: "For BTC and ETH, it looks like we’re starting the week with continued momentum post-Square's announcement of a $50m BTC corporate purchase. This news put a decent floor right around the $10.5k level for BTC and we’ve moved higher since."

Then, on Tuesday, $10 billion investment firm Stone Ridge said that it would purchase more than $100 million worth of bitcoin as part of its treasury reserve strategy. 

Renewed interest in bitcoin comes at the expense of interest in DeFi tokens — at least in professional trading, according to one executive. Speaking on the condition of anonymity, the person said that his desk has been seeing more selling than buying in DeFi names. "A lot of requests to borrow through our lending desk. Some of that being folks position short recently given the unwind in DeFi."

The person added: "Others trying tax-efficiently take off a bit of exposure."

Hyped names in DeFi, such as yearn.finance and sushi, have depreciated more than 40% over the last two weeks. 

"Almost a barometer for the broader DeFi space, YFI continues to underperform," Galaxy said in its note, highlighting the news that a group of DeFi traders are trying to sue YFI founder Andre Cronje and fork the protocol.  

The price slide has not, however, translated to a slide in trading volumes of DeFi tokens on retail exchanges — suggesting that retail traders haven't abandoned DeFi. 

Trading volumes for DeFi tokens been expanding all year. The chart below shows how those volumes have measured as a share of the volumes seen by leading centralized venue Binance. According to research from The Block, that number is now 16% — up from nearly 2% at the start of the year.