As a trader, buying and selling cryptocurrencies from traditional exchanges can sometimes be stressful and include some form of risk, such as theft, wallet hacking, or an increase in slippage due to cryptocurrency market volatility, thereby leading to a spike in price.
However, this is where Crypto OTC trading platforms come in.
What is Crypto OTC Trading
Over-the-counter trading, also called OTC trading, is a trading platform that occurs outside the traditional exchanges. OTC trading platforms are a method of performing cryptocurrency trades directly with the buyer or seller without the need for a third party or custodian.
Crypto OTC trading platforms are mostly used by large-scale traders who purchase a large volume of cryptocurrencies at once, which could be difficult to perform on traditional cryptocurrency exchanges. Crypto OTC trading platforms are also preferred to traditional exchanges because transactions are private between buyer and seller and there is room for price negotiations.
Who is an OTC Trader
OTC trading usually occurs between two parties; one party is referred to as the counterparty, and the other is referred to as the “desk,” which is a business or individual dedicated to buying or selling a particular cryptocurrency to individuals ready to transact.
An OTC trader is either an individual or an agency that is dedicated to buying and selling cryptocurrency. However, in OTC trading terms, an OTC trader is referred to as a “desk”.
There are two types of OTC trading desks.
- Principal desk
- Agency desk
What is the Crypto OTC Trading Platform
Crypto OTC trading is distinguished by the fact that trade occurs directly between two parties, one of which is typically a “desk” — a business dedicated to the buying and selling of a specific asset class.
A Crypto OTC trading platform is a platform where customers interested in buying or selling cryptocurrency assets can meet with several OTC trading desks.
In a Crypto OTC transaction, two parties agree on a price and then work out the transfer of assets. This direct medium of exchange is precisely why there is such saturation in OTC markets—no one other than the parties involved is aware of the price and volume at which various assets are trading “over the counter.”
There are two types of OTC trading desks.
- Principal desk
- Agency desk
Principal desks or OTC trading markets are structured in a way that funds from the OTC trader are used to purchase cryptocurrency assets at customers’ requests. This implies that the OTC trader is assuming risk on behalf of the customer in the process.
Here is a complete breakdown of how trading with a principal desk works:
After submitting a request via a chat application, a market trader responds with a price based on current market rates and conditions. The customer can then choose any of the options to either decline, counter (negotiate), or accept the offer.
The Crypto OTC trading market then commits to delivering the asset upon mutual agreement, as per a legal agreement signed during the onboarding process.
After reaching an agreement, the OTC trader or OTC trading market provider searches its network for the best way to purchase the requested assets. Although the fact that the OTC trading market is using its funds to purchase a customer’s assets is quite risky because there’s a tendency for prices of the cryptocurrency assets to spike higher before they can meet the customer’s request, which could be a loss to the OTC trader in such a scenario.
If the Crypto OTC trading market successfully purchases all of the customer’s ordered assets, the customer is then notified of where and how to pay for the assets. As a result, the OTC trading market trader only sends the purchased assets after the payments have been made.
Unlike the principal Crypto OTC trading market, the agency type of OTC trading market does not trade with its funds and therefore does not take market risks. Before using an agency desk, customers are required to pay a certain amount of fee to the agency OTC trading market for it to act as a middleman on their behalf.
For example, if you wanted to buy cryptocurrency assets from a Crypto OTC trading market agency, you would first fund an account with them and then offer a price range for the assets. The Crypto OTC trading market agency will then go out and try to buy assets with your money at an agreed-upon price.
In this case, the customer bears the risk because the price of the assets (BTC or USDT) may rise before the OTC trading market can complete the transaction. If this occurs, it is clear that the customer’s request will be denied until updates are made.
Best Crypto OTC Trading Platform in 2022
There is an increasing number of Crypto OTC brokers and platforms with public profiles, along with plenty of evidence to suggest the presence of large-scale trades. However, here are the best crypto otc trading platforms in 2022
1# Kraken OTC
Kraken was founded in 2011 in San Francisco and is considered one of the world’s largest and most reputable cryptocurrency exchanges. Kraken’s OTC services were officially launched in 2018 and it quickly became the leading OTC desk for buying/selling large amounts of Bitcoin due to its extensive range of supported cryptocurrencies (over 45) and seamless services.
Kraken provides personal one-on-one OTC services ranging from preliminary consultations to final transactions to users worldwide on a 24/7 basis. Kraken also has an easy-to-use interface as well as a high level of security. The company does not charge any fees for its OTC services, and the minimum trade size is $100,000.
2# Binance OTC
Binance is one of the world’s most popular cryptocurrency exchanges. However, Binance’s OTC desk supports Bitcoin OTC trading and a wide range of crypto-to-crypto pair trading options, including Ripple/Litecoin. Binance OTC currently supports the trading of over 75 different tokens and cryptocurrencies.
The minimum trade size on Binance OTC is $10,000, allowing even inexperienced retail traders to participate in large-scale Bitcoin trading. They provide one-on-one personalized trading assistance as well as quick settlements that are usually completed within minutes.
Genesis Global Trading Inc., based in New York, USA, is an over-the-counter (OTC) trading subsidiary of the Digital Currency Group (DCG) that specializes in providing trading solutions to high-net-worth investors, trading firms, miners, and institutions.
It was founded and previously owned by Barry Silbert in 2013 to be the Bitcoin trading arm of SecondMarket, which also ran CoinDesk and Grayscale Investments.
With a BitLicense from the New York Department of Financial Services, which allows high-value cryptocurrency trades to be executed on their platform, Genesis Trading is an excellent option for high-value and high-volume cryptocurrency trades and loans.
4# Coinbase Crypto OTC Trading Platform
Coinbase, one of the most recognized cryptocurrency exchanges in the world was established in 2011 and is based in San Francisco, California. The company recently introduced Coinbase Prime, a dedicated subsidiary for managing the cryptocurrency assets of corporate institutions.
Access to cutting-edge institutional trading tools like OTC block trading, margin lending, execution algorithms, and much more is made possible by the platform.
Coinbase Prime was selected by MicroStrategy as the main execution partner in 2020 for a $425 million Bitcoin purchase. And by assisting the Tesla corporation is purchasing $1.5 billion worth of Bitcoin this year, the platform has strengthened its position.
Through a committed team of institutional coverage specialists, Coinbase enables you to have a simple and trouble-free experience with Bitcoin OTC trading.
#5 Statstreet Crypto OTC Trading Platform
Large digital currency broker Satstreet is headquartered in Toronto, Canada. The business has impressively high-security standards and is registered as a money services business with FINTRAC, Canada’s National Financial Transactions Agency (MSB).
Satstreet has a stellar reputation for security and accessibility despite being a relatively new company (it launched in 2020) and having already transacted over $300 million in trading volume. High-net-worth individuals, organizations, and Bitcoin mining operations are some of their biggest clients.
Additionally, the business has agreements in place with major cryptocurrency players like Coinbase, Ledger, and Silvergate. The early returns for Satstreet have been extremely positive, and they are well on their way to becoming recognized as a private cryptocurrency bank.
6# CoinSpot Crypto OTC Trading Platform
Coinspot OTC trading platform is an Australian Cryptocurrency exchange launching an over-the-counter (OTC) trading desk. The platform can handle high-volume transactions for its members without relying on traditional public order books.
The project’s goal is to solve liquidity issues for traders who want to deal in larger quantities. The company believes that the OTC desk will reduce its exposure to cryptocurrency market fluctuations. Lock-in pricing is expected to eliminate slippage and reduce the risks of high-volume trading.
7# Independent Reserve Trading Desk
For institutional and high-net-worth investors looking to purchase digital assets in Singapore, Independent Reserve is the region’s top over-the-counter (OTC) trading desk. They provide deep liquidity and individualized service.
The Independent Reserve Trading Desk’s market-leading desk will be able to offer white-glove service, seamless execution, and quick settlements whether traders are looking to trade Bitcoin or another cryptocurrency for $100,000 or $5,000,000.
8# Bitfinex Crypto OTC Trading Platform
Bitfinex, a cryptocurrency exchange headquartered in Hong Kong and registered in the British Virgin Islands, was founded in 2012.
Bitfinex’s OTC services enable clients to trade Bitcoin and other crypto-assets worth $100,000 or more privately. Users can conduct OTC trading with other Bitfinex clients directly or gain access to instant liquidity via the platform’s OTC desk.
Bitfinex recently launched Ethfinex Trustless, a decentralized OTC platform for trading ERC-20 tokens. This platform charges 0.02 percent per transaction. The volume of transactions and the tokens to be exchanged/received are chosen by the clients. They must pay a 0.02 percent fee for each transaction. Because Ethfinex is a peer-to-peer service, users must search for buyers or seek assistance from third-party brokers.
9# Yellow Card Crypto OTC Trading Platform
The Yellow Card OTC trading platform allows high-net-worth individuals and institutions to trade off the norm. Yellow Card Exchange is available at the Over-The-Counter (OTC) desk. Whether trading $50,000 or $1,000,000, Yellow Card’s extensive liquidity pools will be able to meet requirements.
Yellow Card works with a diverse set of liquidity providers to provide you with the most competitive rates for large transactions at a fraction of the cost of trading on an open exchange, where fees and slippage are incurred.
We can trade in the pair that best suits your needs, as we have access to a wide range of fiat currencies. We currently provide assistance in the following currencies: US Dollar, South African Rand, Nigerian Niara, Botswanan Pula, Ghanaian Cedi, Kenyan Shilling, Zambian Kwacha, Central African Franc, and Tanzanian Shilling.
How Does Crypto OTC Trading Work
Over-the-counter (OTC) trading desks play an important role in the crypto industry, but few people understand why, how they work, and what distinguishes one from another.
In general, Crypto OTC trading maintains a diverse network of cryptocurrency trading markets for investors and sellers. OTC traders are constantly looking for buyers and sellers willing to trade at good prices to satisfy their customers.
Crypto OTC desks, like their counterparts in traditional finance, deal with massive volumes of funds that are not available to the public and are done discretely. Crypto traders who purchase large volumes of currency, also known as whales, use crypto OTC trading platforms to make large transactions without disrupting the liquidity balance on traditional exchanges.
Crypto OTC trading differs from traditional OTC because it involves the direct exchange of cryptocurrency assets between two parties. A transaction may be fiat-to-crypto or crypto-to-crypto (such as exchanging Bitcoin for Ether) (swapping US dollars for Bitcoin and vice versa).
Trades always take place between a designated trading “desk” and another person or organization, known as a counterparty, as is the case with all other OTC markets. Crypto OTC trading experienced a high mark in 2018 as the over-the-counter exchange of cryptocurrency valued at billions of dollars.
The most common perception of cryptocurrency OTC trading usually revolves around large off-market transactions, such as when companies like MicroStrategy make multimillion-dollar purchases using OTC desks run by companies like Coinbase or Kraken.
However, OTC trading is not limited to the wealthy; it can also refer to peer-to-peer platforms such as LocalBitcoins, which has been assisting individuals in trading BTC in-person and via bank transfer since 2013.
OTC transactions can be facilitated in a variety of ways, including the following:
Through brokers – Brokers who specialize in large transactions are increasingly handling OTC trades. These platforms provide a personalized service to assist high-volume traders in executing large block trades and avoiding slippage issues by gaining access to funds through liquidity providers who hold large amounts of cryptocurrency.
Using chat rooms- The first significant OTC trading of Bitcoin occurred in an IRC chatroom called #bitcoin-otc. This trading network is hosted on various IRC channels and allows traders to conduct peer-to-peer transactions.
Use of Bitcoin ATMs – Customers can use Bitcoin ATMs to convert their fiat currency into digital coins without having to go through an online exchange.
Advantages of Crypto OTC trading
OTC trading is intended for exchanging large amounts of cryptocurrencies without significantly affecting the market.
Another benefit of using OTC transactions is the lack of restrictions, which means that, unlike traditional Bitcoin exchanges, there is no maximum limit for Bitcoin trading. The high level of liquidity and security provided by OTCs is another advantage.
Furthermore, you can buy Bitcoin and other cryptocurrencies with fiat money without first exchanging it for crypto assets.
Disadvantages of Crypto OTC Trading
Large transactions require the trader to wait, sometimes for an extended period, before an interested party discovers the offer.
Second, the number of coins available for large-scale trading is limited to Bitcoin and a few other cryptocurrencies. Meanwhile, traditional crypto exchanges allow traders to buy and sell tens, if not hundreds, of different digital assets.
The lack of complete transparency is another disadvantage of OTC trading. Frequently, you have little or no information about your trading counterparty, either because they wish to remain anonymous or because of an OTC policy.
Finally, OTC exchanges are not as heavily regulated as traditional exchanges, which exposes traders to risk and uncertainty.
Is Crypto OTC Trading Platform Legit
In the context of Bitcoin and cryptocurrency, Over-The-Counter (OTC) Trading simply refers to private transactions for purchasing or selling cryptocurrency. There is no public order book because these transactions are not conducted on regular exchanges. This increases the privacy of both buyers and sellers.
The privacy and low impact on market prices are the most appealing features for OTC users. OTC is designed for ‘Whales’ who want to buy or sell large amounts of cryptocurrency. If these ‘Whales’ decided to buy a large amount of cryptocurrency on an exchange, their transaction would be heavily influenced by slippage. This makes Crypto OTC trading appealing to high-net-worth individuals looking to execute large trades.
According to estimates, more than half of all cryptocurrency trades take place privately. Furthermore, some believe that the volume of Crypto traded OTC is two to three times that of regular exchanges.
Cryptocurrency OTC desks benefit high-volume traders, institutions, private wealth managers, and hedge funds. These buyers have large capital bases and the ability to trade in large volumes, with transactions ranging from $25,000 to $75,000 on average. Typically, such transaction limits are set by the OTC cryptocurrency broker.
Buying coins or tokens through a traditional exchange exposes you to several issues if you’re a trader looking to buy a significant amount of cryptocurrency. You’ll have to deal with the risks of hacking and theft that come with trading on a regular exchange in addition to slippage, which has the potential to significantly increase the cost of a trade.
Over-the-counter (OTC) trading is useful in this situation. OTC trading is a service accessible to high-volume traders, however, there are some platforms that allow for lesser funds.