The crypto over the counter market, or crypto OTC, is an integral part of the cryptocurrency market. Cryptocurrency exchanges like Coinbase and Binance account for a very small amount of cryptocurrency trading – most trading occurs in the crypto OTC market. Every day, billions of dollars are traded through private deals – not on any public exchange. The term ‘over the counter’ is just another way of saying that a trade has been privately negotiated and not done on an order book.
What is the cryptocurrency OTC market?
The cryptocurrency over the counter market, or crypto OTC market, refers to any trade of a large quantity of cryptocurrency outside of exchanges. In other words, over-the-counter trading can be as simple as dealing directly with another person for an individual trade or as complex as engaging in a trading desk for a large quantity of cryptocurrency. Examples of OTC transactions include:
- A cryptocurrency mining company purchasing new equipment using crypto.
- An ICO launching and buying their own tokens from the market to sell to users.
- A private equity firm fulfilling investor redemption requests.
Pros and cons of trading OTC
There are both pros and cons to trading cryptocurrency OTC. The lack of liquidity in the market makes the process time-consuming, but it also protects buyers from paying too much by taking advantage of their position as a buyer in larger quantities. On the negative side, OTC trades may require an intermediary between traders. Most exchanges don’t really want to get involved in facilitating OTC trades because of the complexities that arise, but it’s more of a practical matter than anything else.
OTC trading can be extremely profitable if done correctly. Because the market is still relatively unregulated, traders aren’t required to submit to KYC or even disclose their identity, which can open up major issues if traders are taking advantage of crypto OTC. In the future, however, it’s likely that the government will take a more rigorous approach to cryptocurrency regulation and these issues will begin to resolve themselves.
How do you trade cryptocurrency OTC?
The process varies depending on the platform you’re using. In general, most OTC exchanges function like any other trading platform, though there are a few major differences you should be aware of. Processes can vary from exchange to exchange and OTC to OTC, but here’s the general process:
- You create an account and provide your real name and contact information.
- You deposit cryptocurrency into your account and place a “buy order” for the amount you want to purchase.
- Your trade is matched with another party willing to sell the same type of cryptocurrency at the price in your buy order.
- The funds are released from escrow, and you transfer them into your wallet.
That’s really all there is to it. As long as you’re trading OTC with a reputable cryptocurrency exchange and doing KYC, you should be fine.
What OTC trading platforms are available?
Most major crypto exchanges offer some sort of cryptocurrency OTC trading desk or service. Binance, for example, offers their own OTC platform for large-quantity trades. Because the company is involved in cryptos from the beginning, they have a vested interest in ensuring OTC trading goes smoothly. There are also several cryptocurrency startups focusing only on bringing OTC crypto trading to the masses.
These companies usually function as software platforms that enable traders to connect with one another and conduct trades directly from their wallet or brokerage account, ensuring security and safety throughout the trade. Secure Digital Market is a reliable OTC platform that offers top security and has access to multiple trusted traders.
How can you get cryptocurrency OTC?
Now that you know how to trade OTC cryptocurrency, it’s time to learn where to get it. Most of the major exchanges have an OTC market or available service for large trades, but if you’re looking for smaller transactions, there are several new startups focusing on connecting individual traders and facilitating OTC crypto trades.
You should always do your research before using a service, however, and never agree to pay for cryptocurrency OTC until you know exactly who you’re dealing with and what the terms of the agreement are. It’s also important to note that many of these startups operate in unregulated markets, so you should be especially wary of scams.
Tips for trading cryptocurrency OTC
If you’re ready to get into cryptocurrency OTC, there are a few tips you should remember before making your first trade. First, always do your research and don’t agree to pay for crypto unless you know exactly who the seller is and what the terms of the deal are. If the seller is a company and not an individual, make sure you’re not paying for a scam.
Second, always use a reputable cryptocurrency exchange to conduct your trade. Binance, for example, is an extremely trustworthy company that operates one of the world’s largest OTC Bitcoin markets. Finally, don’t forget to calculate fees before you complete your trade! Always make sure you know how much money you’re going to end up with at the end of the transaction.
Hopefully, after reading this article, you have a better idea of how to trade cryptocurrency OTC. If you’re ready to put your skills to work and cash in on the potentially lucrative world of crypto OTC trading, it’s time to get started.