What is OTC Crypto Trading?

Over-The-Counter (OTC) crypto trading involves direct transactions between buyers and sellers, bypassing conventional exchange order books. It caters to significant trade volumes, executing trades without causing rapid market fluctuations. OTC trading is particularly favored by institutional investors seeking to conduct substantial trades.

How Does OTC Crypto Trading Work?

Communication and Price Determination: Parties initiate communication to agree on trade details. They negotiate the amount, cryptocurrency type, and pricing, which might slightly differ from prevailing market rates.Agreement and Transaction Details: Upon reaching an agreement, trade terms are finalized, with security and confidentiality being paramount.Identity Verification and KYC: Identity verification, including Know Your Customer (KYC) compliance, may be necessary for security purposes.Payment and Asset Transfer: Once an agreement is established, payment and asset transfer processes commence, often utilizing methods like bank transfers.Trade Completion: Upon successful payment and asset transfer, the trade is completed and confirmed by both parties.

Advantages of OTC Crypto Trading:

Reduced Market Impact: OTC trading minimizes the influence of large trades on the market. This allows for significant trades without causing sudden price fluctuations.Privacy and Security: OTC trading offers a more private trading experience compared to conventional exchanges, ensuring confidentiality.Flexibility and Customization: OTC trading allows for higher flexibility between parties, with customizable trade details and terms.High Liquidity: OTC trading platforms provide ample liquidity, catering to significant trade volumes.Ideal for Large Trades: OTC trading efficiently handles substantial trades, overcoming liquidity challenges on traditional exchanges.

Which Cryptocurrencies Are Traded OTC?

OTC trading primarily involves cryptocurrencies with high liquidity. Major cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) are commonly traded in OTC markets due to their substantial market capitalization. With the Seaby Labs OTC desk, you can easily trade BTC, ETH, Bitcoin Cash (BCH), EOS, Litecoin (LTC), Tether (USDT), Stellar (XLM), XRP.Additionally, Seabylabs supports many fiat currencies, including USD, GBP, EUR, TRY, JPY, SGD, CAD, CHF and AUD.

Size of the Crypto OTC Market

The OTC market continues to expand as more institutional players and major investors opt for this avenue to conduct large-volume trades. Over-the-counter crypto flows are hard to gauge.In a 2018 report, capital markets research firm TABB Group claimed that the OTC cryptocurrency market is at least two to three times larger than the crypto exchange market. At that time, the Bitcoin exchange market alone was processing around $4 billion in trades per day. Following TABB’s estimates, that would mean $8 billion–$12 billion was being traded off-exchange per day. A more recent estimate from March of this year put the volume of Bitcoin traded via OTC at around $20 billion per day. (According to CoinGecko, the current daily spot volume for BTC is over $26 billion.)

Conclusion: OTC Crypto Trading

In conclusion, OTC crypto trading offers unique benefits, including reduced market impact, privacy, and customization, tailored for substantial trades. This method suits institutional investors seeking a secure and efficient way to trade. The OTC market is a growing segment within the crypto space, offering investors a flexible and secure trading experience.