2018-11-8 09:00 |
OTC (over-the-counter) trading is cryptocurrency trading that takes place away from cryptocurrency exchanges. Favored by many large-scale traders, OTC trades are often placed by hedge funds, private wealth managers or high-net-worth individuals.
OTC trades can be facilitated in several different ways, including the following:
Via brokers. OTC trades are increasingly handled by brokers who specialize in large transactions. These platforms offer a personalized service to help high-volume traders execute large block trades and avoid problems with slippage by accessing funds through liquidity providers that hold large amounts of cryptocurrency. Through chat rooms. The first major OTC trading of bitcoin took place in an IRC chatroom called #bitcoin-otc. This trading network is hosted on various IRC channels and allows peer-to-peer transactions between traders. Using ATMs. Bitcoin ATMs allow customers to convert their fiat currency into digital coins without needing to go through an online exchange.There are several reasons why large-volume traders might consider going OTC:
Better prices. The traditional (on-exchange) cryptocurrency market is still in its infancy, and there may not always be sufficient liquidity available on exchanges to process large trades. As a result, placing a substantial trade through a traditional exchange could move the price of a cryptocurrency in an unfavorable direction before your trade could be completed – this is known as slippage. Instead of being filled for a single price, large orders can end up being spread over several smaller orders, with the price of each order often increasing. OTC trading allows traders to access one price for a single buy order. Avoid low trading limits. Most traditional exchanges place a limit on the maximum amount a user can trade per day as well as on the amount that can be withdrawn from an account in a 24-hour period. These limits can also vary based on factors such as the transaction methods used, the level of account verification completed and how long a user has been trading with the platform. In many cases, they may be insufficient to meet the needs of large-scale traders. Quicker trading times. Depending on the liquidity available, large trades can take days to be completed on a traditional exchange. Using OTC trading can guarantee faster processing times. Use a trusted broker. There have been numerous examples of traditional cryptocurrency exchanges being targeted by, and all too frequently falling victim to, hacking attacks. Placing OTC trades through a trusted broker allows you to avoid this risk.OTC trading pros
Designed for large-scale trades, either for high-net-worth individuals or institutional traders Allows you to avoid slippage, which may result in a better price Avoids hacking risks associated with cryptocurrency exchanges Allows you to deal with a trusted broker Often offers a faster settlement of large trades and quicker access to your funds than exchange-based transactions Also a viable option for ICOs looking to convert crypto earned from their projects into fiat currencyOTC trading cons
May have higher fees than traditional exchanges OTC trading can’t be automated through an API like exchange trading can Only for large-scale investors, so not an option for small traders If using a broker, you’ll need to trust the broker to thoroughly vet counterparties before trading Higher level of settlement risk than traditional exchange-based trading Trading directly on an exchange may be more beneficial for those who want to actively trade price movements.Similar to Notcoin - TapSwap on Solana Airdrops In 2024
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