institutional capital is flooding into crypto but not where you think they are flipping memes just like the rest of us but in parallel private markets that are opaque to you and I well not anymore one of crypto’s biggest market makers Reveals All in a new report about how institutional OTC crypto trading exploded in 2024 stick around to find out what where and how institutional investors are trading plus key predictions about how they could transform crypto in 2025 my name is Nick lock in today’s report is from none other than wintermute and if you’re not familiar winter mute is one of the most important players in the crypto Market it’s one of crypto’s biggest market makers providing liquidity to every corner of the crypto verse from decentralized exchanges to institutional over-the-counter or OTC Trad and of course Sexes too I mean centralized exchanges today we’ll be focusing on winter mut’s OTC desk rather than the market making business now OTC or overthe counter crypto trading is of interest to us because it’s that aformentioned parallel and opaque crypto Market where institutions and the Very biggest crypto Wales execute their trades the main reason for trading OTC is the massive size of the trades involved let me put it this way if Michael sailor logs into binance and tries to Market buy a billion dollars of BTC at $100,000 the order will not be fold in an orderly and efficient manner a billion doll buy order would melt through the supply of BTC on the order book resulting in an average purchase price significantly higher than $100,000 this would produce an enormous green Candle on the chart representing not just sailor’s billion dollar buy but also a liquidation event as his high pressure squeezes shorts out of their positions triggering forced buying orders of this magnitude leave a conspicuous footprint on the market for all of the world to see and this isn’t ideal for institutional investors who don’t want to create a spectacle every time they take a trade OTC markets solve this problem by facilitating large transactions between institutional investors discreetly and without moving crypto prices on the public market so you can imagine our excitement when we saw that wintermute shared a report full of data from this normally impenetrable market for institutional crypto trading the report uses data from Winter mut’s own OTC desk to identify how institutional crypto trading changed in 2024 and predict what key developments will shape the market in 2025 let’s start with the trends that defined 2024 and if we could give you a one-word summary it would be expansion basically every metric in this report points to more demand for crypto from institutions of course we already knew this was true anecdotally we spent all of last year making videos about how tradire institutions and governments were getting their feet wet in crypto however it’s not every day that you get to see this trend borne out in exchange data from the private OTC desks used by institutional investors let’s put it this way you won’t find winterm mute on coin market cap or coin gecko that’s for sure at the top of the report winter mute reveals that its OTC trading volumes more than quadrupled in 2024 yes more than quadrupled and that is absolutely Bonkers and a much faster rate of increase than the overall crypto Exchange Market where trading volumes only increased by 142% the report highlights how volume growth was signposted by certain key events and uh no prizes for guessing what it’s talking about the sec’s approval of spot Bitcoin ETFs in January and the election of Donald Trump in November had winter mut’s OTC desk on fire with volumes reaching new all-time highs previously wintermute had recorded its highest ever OTC trading volume of $2 billion in a single week in 20123 that record was smashed in November 2024 and not by a busier week but by a single day of trading volume which saw $ 2.24 billion in volume the growing demand for plac in big bets is also borne out in the average trade size on wintermutes OTC desk which grew 17% year on year counterparties were trading much more frequently too with the number of Trades increasing by 250% in 2024 we also were interested to learn how expansive winter mut’s asset support is it grew by 64% in 2024 from 576 to 946 unique trading pairs this is a Prett pretty huge number and it reminds us that the category Institutional Investor is not at all homogeneous it encompasses Market participants of various different sizes and risk appetites including I suppose institutional buyers of shitcoins and if you think I’m kidding then you’re going to love the next graph I’ve got for you wintermute broke down its OTC spot trading volume from tradire institutions specifically by asset sector we can see that crypto is filed under media arts and entertainment which calls to mind the metaverse lost a lot of Mind share last year with OTC volume down 50% layer 2’s also suffered with volume down 18% however defi was up 18% and no doubt boyed by the slaying of Gary gensler’s SEC and the election of D5 founder Donald Trump to the presidency then there is the category currency networks which you can take to mean xrp and xlm and their trading volume increased by 20% % in 2024 now this is all very interesting but what’s this big green candle over here ah of course memes OTC trading volume of meme coins by tradire institutions grew by 2 10% year on year 2024 was truly the year of meme coins and just as we always said institutions are absolutely feeling the fomo winter mute also shows us how money flooding into meme coins at away at Major crypto share of winter mut’s OTC spot trading volume which fell from 67.9% in 2023 to 58.7% in 2024 interestingly the share of volume accounted for by altcoins here meaning non- majors and non-mean coins held steady barely budging from around 25% meanwhile mcoins share of trading volume increased from 7.3% to 16.2% of total winter mute OTC volumes overall the trend is pretty straightforward a movement of institutional capital from the least risky categories to the very riskiest and this is Peak bull market energy and it’s a reminder that wherever we are in the current cycle it’s definitely not the beginning the report also breaks down winter mut’s OTC spot mem coin volume by Meme here we can see that the incumbents Doge and ship represented the vast majority of meme coins volume at wintermute at 53.6% and 34.6% respectively and this is down from 62.5% and 36.2% in 2023 the reduction is accounted for by the rise of other memes in 2024 most notably Pepe whose trading volume Rose from 1.2% in 2023 to 9% in 2024 interestingly with and other meaning every other meme coin accounted for just 1.4% of memin trading volume each in 2024 this tells us that while institutions are indeed buying meme coins they’re very Discerning about it I guess we shouldn’t be surprised to see them betting on Blue Chips instead of scraping the bottom of the deck screen a barrel and getting rugged still it makes us wonder about the 370 unique trading pairs added by winter mute last year I can only assume this includes a bunch of newer memes and other small caps but based on winter mut’s OTC volume data it looks like there is very little interest in trading them this conservative tendency is also clear from the winter mute breakdown of OTC spot meme coin volume by ecosystem unsurprisingly salana witnessed explosive growth from 2023 to 2024 to be precise its share of OTC spot mcoin volume 17x in the last year it’s pretty crazy stuff and yet Lana still accounts for just 5.1% of OTC spot mean coin trading compared to ethereum’s 94.7 and this really puts things into perspective sentiment around ethereum has been abysmal for at least a year now but it is still extremely dominant at least when it comes to institutional meme coin portfolios the optimistic take here is that ethereum is doing just fine it’s still King and its first mover Advantage is a note so big that no competitor can pose a serious threat on the other hand though a pessimist would say that institutional mcoin preferences are a laging indicator and ethereum has a very very long way to fall from here mut’s derivatives offerings which expanded in 2024 in response to demand from institutional investors for leveraged exposure to crypto and the report details how winter mut’s new cfd products accounted for 4.3% of total OTC trading volume just 9 months after launch now I know what you’re thinking Nick what the heck is a cfd it sounds contagious well not to fear a cfd or contract for difference is just another Financial derivative alike Futures and options for regulatory purposes cfds are their own class of derivative but in fact they actually Bear an uncanny resemblance to Perpetual Futures contracts that we all know and love like perss C s allow you to make a leveraged directional bet on the price of an asset and profit in the event that the price moves in your favor the contract is settled in cash and at no point do you hold the underlying asset cfds have no expiration date uh so positions can be held open indefinitely keeping a position open May incur fees but unlike perss there is no funding mechanism involved what sets cfds apart at least in the OTC market is their customizability I like to think of cfds as a bespoke purose for institutions where the broker and the counterparty negotiate in advance specific margin requirements or risk parameters wintermute OTC cfds were launched in March and spent the next two quarters accounting for less than 1% of total wintermute OTC volumes this suddenly ramped up to 4.3% in Q4 no doubt reflecting a thirst for leverage after Donald Trump’s election victory in November turning to the composition of cfd activity we can see that BTC is dominant accounting for 68.2% of winter mut’s OTC cfd volume no surprises there eth delivered a shocker though because not only is it not in second place it barely scraped third xrp is in second place with 15.3% of volume while eth at 7% is only a hair ahead of salana at 6. 9% interestingly the Bitcoin Cash’s bch is next accounting for 1.9% of volume while all other cryptos put together made up just 0.7% the overall growth in cfd activity is quite significant when you consider how much winter mut’s overall OTC volume grew last year however if we can consider cfds as analogist to Perpetual Futures contracts in the public crypto markets 4.3% is a remarkably small portion of overall trading volume the reason I say this is because most of the trading volume on centralized crypto exchanges is generated by highly levered pers Traders so then why are the volumes for winter mut’s OTC leveraged cfd products still so small compared to overall OTC volumes maybe it’s just because wintermute cfds are still relatively new they only launched in March of last year and if the current Trend continues their share of overall volume will increase but this might also tell us something about how Leverage is used by institutional investors versus by retail Traders for many retail Traders Leverage is a means of playing with otherwise Unthinkable sums of money this is a misunder understanding of the purpose of Leverage Leverage is not supposed to Define your position size you are supposed to determine an appropriate size and leverage merely determines how little Capital you can use to achieve that size institutions understand this and use leverage for the purposes of capital efficiency and managing counterparty risk and this implies a lower degree of Leverage because the more levered a position is the more at risk of liquidation it is and this defeats the purpose of using leverage as a riskmanagement tool next the report turns to wintermutes OTC options whose volume grew by 27% year onye and this growth is notably outsized compared to overall cryp to exchange options volumes the report explains that this reflects institutional demand for bespoke strategies which is kind of the whole point of trading options OTC rather than on exchanges options are still quite unfamiliar to many participants in the crypto markets but as trafi and crypto continues to converge we expect demand for options to see strong growth some have even argu that BTC options are going to trigger something akin to an indefinite bid that causes prices to explode to the upside and if you want to find out why well we made a video all about that link to right over here now the remainder of the report is filled with winter mut’s key predictions for the year ahead in crypto and a spoiler alert there are no price predictions it’s not that type of report unfortunately still it’s the start of what should be a very big year for crypto so let’s check out the highlights the first prediction will be familiar quot the US will begin consultations to create a strategic Bitcoin Reserve China UAE and Europe will be forced to follow for our full take on this check out our recent video on global SBR adoption that will also be linked to in the description but at the time of making this video the Trump administration’s position is very much uh we’ll look into it and not we’re beginning consultations to create it big difference there presumably it wouldn’t be very difficult for the federal government to start calling its existing BTC Holdings strategic assets they could do that voila there you’ve got your strategic Bitcoin Reserve but the real question is will they actually start buying BTC on the taxpayers dollar possibly but it’s a much much bigger ask if this does happen the question of other countries foll is an interesting one frankly the UAE probably won’t need much persuading China and the European Union though are a different story because they have historically taken a fairly dim view of crypto unless there is a change in leadership we don’t expect them to capitulate immediately upon receiving news of the US bu in BTC it may take some additional shock from the fiat currency system perhaps stemming from sovereign debt crises uh to persuade the EU and China of bitcoin’s value We’ll add that Russia should be on this list too Russia is expected to scale up its use of BTC for trade settlement in 2025 and this kind of adoption could quite easily foreshadow the government stockpiling BTC winter mut’s second prediction is a little more fresh quote a listed Corporation will issue debt or shares to acquire ethereum # mstr 2.0 this is kind of a contradiction in terms because Michael sailor’s whole stick is that there is no second best crypto still if we consider it a possibility then the question becomes wouldn’t it be e obviously it’s the second largest crypto by market cap but the sentiment is so dire at the moment that it’s difficult to picture Michael sailor but for eth maybe we should return to this prediction once eth has broken the cell wall at $4,000 and sentiment is back above sea level the next prediction is related to stable coin adoption and adoption by big business businesses to be exact quote a large corporate event dividend acquisition merger will be completed and settled in stable coins hm we could see this happening especially if at least one of the companies involved is a crypto or web3 company so for example for Circle or coinbase there would be significant symbolic value in doing something like this and if the corporate event is Distributing dividends to shareholders we can see the Practical benefit of settling its instable coins on CH merges and Acquisitions are quite a different story though and it’s not clear to us if they are hampered by problems that are begging to be solved by stable coins perhaps we’re missing something but we think widespread acceptance of stable coin payments in the US would be a much more Salient Milestone next up winter mute predicts quote a core asset manager will launch a mcoin ETF our monies on # Doge Round of Applause please everybody in late January winter mute filed a registration with the SEC to create a Dogecoin ETF Days Later grayscale announced the creation and launch of its new Dogecoin trust although it’s not clear if this is intended as a stepping stone towards a grayscale Dogecoin ETF at any rate we think this prediction is as good as fulfilled we do have mixed feelings about this though simply because this is the kind of silly news that tends to come out around cycle tops if the Market starts tomorrow I’m blaming bitwise and grayscale jokes aside the final prediction we’ll highlight from Winter mut’s report is that a quote systemically important bank will offer spot cryptocurrency trading to clients this would break down a huge barrier that exists between crypto and trafi at the moment and enables seamless balancing of crypto risk against equities in institutional portfolios we think this is very likely in late January the House of Representatives launched an investigation into operation chokepoint 2.0 in which the US crypto industry was systemically shut out of the banking system Days Later Federal Reserve chair Jerome pal commented at an fomc meeting quote banks are perfectly able to serve crypto customers as long as they understand and can manage the risks all in all it’s looking very good for us crypto firms in need of banking services so winter mut’s report paints a vivid picture of the Boom in OTC crypto trading by institutions in 2024 and the remarkably bullish Market posture that we’re facing as 2025 starts to heat up we used to dream of Times Like These so it’s really worth taking a moment to appreciate just how far crypto has come let’s just hope that macro conditions will continue to cooperate so that the bare Market doesn’t arrive too quickly and uh spoil all our fun now if you enjoyed that video you can watch our latest one right over here and if you’re not subscribed to the channel yet you can do that right over here that’s me for now and I’ll see you next time [Music]
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