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<\/p>\nOver-the-Counter (OTC) trading has been in use with traditional investors for many years now and has only recently gained prominence in the crypto investment arena. Over-the-Counter (OTC) trading has been in use with traditional investors for many years now and has only recently gained prominence in the crypto investment arena.<\/p>\n
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Since the launch of the first crypto OTC platform by Circle in 2014, the industry has witnessed a marked shift of interest from trading exchanges to OTC desks. It is difficult to quantify the extent of transition given that OTC crypto dealings happen behind closed-doors. However, Circle hints at a two to three fold higher trade volume of crypto over-the-counter transactions per day vis-a-vis that of regular crypto exchanges. For example, in 2018, Bloomberg reported daily OTC transactions to be around a staggering US$ 30 billion whereas the corresponding figures for crypto exchange trade stood at only roughly US$ 15 billion.<\/p>\n
As Over-the-Counter trading continues to gain popularity in crypto investor circles, stakeholders are wondering what OTC trading involves, how exactly crypto OTC traders are benefitting from it, and most importantly what the possible risks are. Read ahead as we break down all that you need to know.<\/p>\n
What is OTC trading?<\/strong><\/p>\n An OTC market is a decentralized marketplace, where trading takes place directly between the two parties involved \u2013 in this case, the crypto traders and the market makers. It does not require the presence of any intermediary (unlike a crypto exchange). Although a few crypto Over-the-Counter brokers were in operation a few years ago, the picture is entirely different now. Not only are there numerous crypto brokers, but major exchanges have also installed their own OTC desks to make the most of the digital asset flow in the sector. Going by reports, North America and Asia record the highest OTC crypto activities worldwide.<\/p>\n It goes without saying that there are countless positives of crypto OTC trading that have recently brought it to the forefront, but before delving deeper, let\u2019s highlight a few key elements of the OTC sector.<\/p>\n Who prefers crypto Over-the-Counter trade?<\/strong><\/p>\n Crypto OTC desks are lucrative trading interfaces for high-volume traders, institutions, private wealth managers, and hedge funds. These buyers have huge capital bases and the capacity to trade in large volumes, often ranging from US$ 25,000 to US$ 75,000 per transaction. For OTC trade, such transaction limits are usually set by the OTC cryptocurrency broker.<\/p>\n Crypto miners, on the other hand, are the primary sellers in the Over-the-COunter trading domain.<\/p>\n Various channels of OTC crypto trade<\/strong><\/p>\n OTC trade can presently be conducted via different channels. These include \u2013<\/p>\n The pros and cons of cryptocurrency OTC trading<\/strong><\/p>\n Through the crypto Over-the-Counter marketplace, professional investors can conduct bulk trades privately without price slippage. This is the primary reason why institutional investors are leaning toward OTC desks, not to mention their preference for the utmost professionalism, discretion, and best-price execution these platforms deliver. Let\u2019s take a look at the core competencies and significant shortfalls of cryptocurrency OTC trading.<\/p>\n Positives<\/strong><\/p>\n Drawbacks<\/strong><\/p>\n The crypto industry however still needs to address certain challenges if they wish to get the best out of OTC trading. Here are a few of them.<\/p>\n The relevance of Blockchain <\/strong><\/p>\n Most of the drawbacks of Over-the-Counter trade discussed here are due to the absence of transparency and automation, which, with futuristic OTC software can easily be overcome. Automating OTC platforms with cutting-edge over the counter software would mean \u2013<\/p>\n Noted crypto Over-the-Counter platforms are automating their interfaces to deliver the most trusted services to their clients. Going forward, blockchain will deliver high-performing OTC desks with institutional-grade security to further enhance Over-the-Counter crypto trading experience.<\/p>\n Citations:<\/strong><\/p>\n\n
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