After overcoming the long crypto-winter, the wider blockchain industry has begun to re-emerge in full force. From Bitcoin reaching new highs to a vast range of new coins climbing up the ranks, the cryptocurrency industry has had an exciting past 18 months, currently representing a total value of over $2.18 trillion USD.
As the industry continues to mature, cryptocurrency traders are continually looking for ways to enhance their practice, access new opportunities, and improve their potential returns. One method that many large-scale cryptocurrency traders now consider is Over-the-Counter (OTC) trading.
OTC crypto trading is when a trader executes their trade through a specialized OTC crypto brokerage. Opposed to traditional exchanges, an OTC trading firm offers enhanced privacy and the ability to direct buy or sell cryptocurrency between two parties. As a direct, secure, and high-liquidity solution, OTC crypto trading is rapidly gaining popularity.
In this article, we’ll explore what is OTC in crypto, touch on the benefits of this method of exchange, and outline what to look for in an OTC trading partner.
How Does OTC Work?
Unlike within regular exchanges, trades within an OTC system are directly between two parties. This closed form of trading ensures the involved parties a greater level of privacy, as their trades aren’t publicly displayed on a traditional exchange.
Typically, there are three steps to OTC crypto trading:
- Inquiry: An interested seller or buyer inquires about an OTC cryptocurrency service, requesting and receiving a quote on the current rates for certain pairs.
- Negotiation: OTC parties are often looking to trade large amounts of cryptocurrency, giving them the leverage they need to go back and forth with the other party and negotiate a better price.
- Acceptance: Once both parties are pleased with the exchange terms, they will facilitate the trade, providing an instant settlement to deliver the funds as quickly as possible to the involved parties.
This approach is secure, direct, and perfect for those looking to keep their trades as secret as possible.
What Are the Benefits of OTC in Crypto?
One of the main reasons that OTC cryptocurrency trading has become so popular is due to the vast range of benefits that it can offer.
Here are some of the most prominent benefits of OTC in crypto and why they benefit traders:
- Privacy: The central benefit that motivates the vast majority of OTC crypto trading is the ability for the trading parties to remain completely anonymous. As the exchange does not occur on a traditional exchange, the parties involved can maintain their privacy. For investors who don’t want to create a public trail of the movement of their funds or want to remain anonymous, OTC cryptocurrency is an excellent choice.
- Reduced Market Impact: When traders want to move large amounts of cryptocurrency or make high-cost investments, their rapid purchase or sale of a cryptocurrency may have a direct impact on the market. This can instantly swing the value of the cryptocurrency in an unfavorable direction, reducing the potential profit margins of an exchange. With OTC cryptocurrency, the transaction occurs outside the realm of the typical market, with the enhanced privacy and isolation of the transaction ensuring that it does not impact the market cost of a coin.
- Instant Settlement: Depending on the exchange that a trader is using, the time it takes to execute and then settle a cryptocurrency trade can radically vary. Some exchanges from centralized backgrounds still function within working hours, like the stock exchange, despite the 24/7 availability of cryptocurrency. With OTC trading, traders will be able to instantly settle their trades, guaranteeing them the rates and expected amounts that they planned on.
- Real-Time Updates: Typically, OTC crypto providers will offer quotes on demand, often using automated software to deliver real-time quotes to cryptocurrency traders. The ability to rapidly generate quotes and use these to then execute trades provides many with the flexibility they need to draw more profitable margins out of cryptocurrency trading. Especially for traders that actively move cryptocurrency frequently, this level of availability is an extremely advantageous benefit.
What Should You Look for in an OTC Crypto Provider?
Of course, the ability to access the benefits of OTC crypto trading depends entirely on a trader’s ability to source and establish a relationship with an OTC firm or provider. Due to the relatively novel nature of OTC trading in cryptocurrency, there are only a handful of established firms.
Here’s what you should look for when selecting an OTC crypto partner:
- Extensive Liquidity: When traders seek out OTC partners, they are mainly looking to trade high volumes of cryptocurrency. To facilitate this, your partner needs to have enough liquidity to cover your exchange. Liquidity is a vital part of what makes a provider feasible and effective.
- Comprehensive Security: As with any trading platform, your OTC provider should uphold industry-wide security standards and have a comprehensive cybersecurity infrastructure in place to guarantee the safety of all involved parties.
- Appropriate Terms: Each OTC provider will either list their standard fees and rates on their site or provide them once an interested party requests a quote. Traders should ensure that the fees and structures outlined match their expectations before initiating trade negotiations.
- Business Reputation: Perhaps the most important thing to look for in an OTC cryptocurrency partner is their reputation. Firms that excel in the other three categories listed here will typically have a great reputation, making this the mark of a partner you should select.
Final Thoughts
OTC cryptocurrency trading is an alternative for traders who are looking to maintain their privacy, secure instant settlement periods, and trade large volumes of cryptocurrency without impacting the wider market. For traders that
When looking to enter into the world of OTC crypto trading, it’s vital that you find the right provider. While the privacy of this sub-industry can be a benefit, it can also provide an effective mask for scammers or other malicious actors. Always partner with trusted providers with a strong industry reputation when considering which firm to use.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
