Understanding Crypto OTC Trading in seconds
Crypto OTC Trading is simply trading crypto assets directly between two parties in a closed trading market. This trading market is unlike an exchange where there are several prices. Here, the parties involved only have the private price they show and can negotiate deals based on the amount each party has or is interested in buying. Imagine a picture of two persons involved in private trading negotiations. On the one hand, one person is available to sell assets at a given price, and on the other hand, the other is willing to buy assets at a given price.
An OTC trade occurs when both parties agree on the trade price or exchange for which they agree. A trade can be crypto-to-crypto (For example, swapping bitcoin with tether) or fiat-to-crypto (For instance, swapping XAF or Rand for bitcoin and vice versa). Whether crypto-to-crypto or crypto-to-fiat, the need for a “trading market or desk” to effect the transaction is imperative. OTC trading markets or desks are professional platforms dealing directly with crypto buyers or sellers. They could be an OTC Trading Principal Desk or Agency Market.
Why Use a Crypto OTC Trading Desk?
High-volume traders, institutions, private wealth managers, and hedge funds benefit from cryptocurrency OTC desks. These buyers have large capital bases and the ability to trade in large volumes, with transactions typically ranging from US$ 25,000 to US$ 75,000. The OTC cryptocurrency broker usually sets such transaction limits.
Buying or selling large amounts of crypto is the most challenging thing faced by crypto merchants. Let’s assume that you want to buy 1000 BTC. First, it will be challenging to get all that amount from one seller all at once. If you attempt to buy from one seller, chances are that you won’t get all the assets at the same price because fulfilling a large number of orders on a single exchange will take time, and market volatility will influence the price.
However, this problem of buying large amounts of crypto is resolved through trading with OTC trading desks. Through the Principal or Agency OTC market, you can buy any amount of BTC on a single order without stress.
Let’s look at some advantages below of trading crypto using the OTC market desk.
The Advantages of Trading with an OTC Market Desk
- Liquidity: Liquidity is the prime factor as far as over-the-counter trading is concerned. It is an open secret that crypto exchanges specifically have very low liquidity. Exchanges often struggle to execute a large order effectively, so they break that order into small pieces. On the other hand, purchasing cryptocurrencies through an OTC trading market minimises the risk of price spikes, given that most OTC trading markets can sell large amounts of crypto.
- Confidentiality: OTC trading markets exchanges are a one-to-one affair, thereby offering slim chances for third parties to come between a transaction or know them. This makes exchanges within this space to be essentially private. As such, customers can run their transactions without any fears or threats.
- Direct Transactions: With OTC trading markets, buyers and sellers are empowered to make direct trades void of third parties and without any restrictions. This directly solves the problem of scam schemes that most often act under the banner of third parties, commonly referred to as “plugs”. With direct transactions, buyers can trace their sellers.