Every cryptocurrency investor knows the importance of cryptocurrency exchanges. However, more experienced investors who want to trade large amounts of crypto assets often decide to stop trading on the popular cryptocurrency exchanges and turn to over-the-counter trading. With that said, OTC desks, such as NextHash, are becoming more and more popular among more advanced traders.
In this article, we will explain what a crypto OTC desk is, who should use it, and the main benefits of using it. We will also share why NextHash is the best crypto OTC desk for both big and small traders.
Crypto Exchange vs. Crypto OTC
In short, an over-the-counter (OTC) market is a decentralized trading market where transactions are made directly between two parties - the buyer and the seller - without the intermediation of a third party. In the case of the traditional cryptocurrency exchanges, the exchange plays the role of the intermediary.
Unlike the crypto exchange, the crypto OTC market allows each transaction to be kept private between the two brokers involved. Furthermore, in this market, the transaction price is not publicly displayed. Therefore, it allows for more privacy and anonymity. What’s more, the crypto OTC market enables investors to trade higher amounts of crypto assets without adhering to the high and often rigorous requirements of the traditional crypto exchanges.
OTC trading is not specific to the cryptocurrency market. It is also a popular way of trading stocks. It is estimated that around 30% of the total stock trading volume is done via OTC markets. For cryptocurrency, this percentage is even higher.
Crypto OTC Desks Explained
There are several ways to trade cryptocurrency over the counter. OTC transactions usually go through a so-called “crypto OTC desk.” There are two main types of OTC desks: a principal OTC desk and an agency OTC desk. Oftentimes, traders consider a principal desk as the best crypto OTC desk to execute large transactions with lower risk and smaller fees.
A principal OTC desk operates as a dealer who trades directly with its customers. The name “principal desk” comes from the term “principal risk.” This is because a principal OTC desk assumes the risk of the transaction by using its own funds to buy the amount of cryptocurrency requested by its customer through its vast network of buyers and sellers. The OTC desk earns on this transaction by purchasing the amount of cryptocurrency it accepted to deliver to its customer from a seller at a price slightly lower than the one it agreed on with its customer.
An agency OTC desk is another type of crypto OTC desk. An agency OTC desk is essentially a professional OTC trading platform that connects buyers with sellers to facilitate the transactions between them. In most cases, investors who want to sell large amounts of cryptocurrency do not directly know a buyer who wants to buy that specific amount. Therefore, they need an intermediary to connect them to the right buyer. An agency OTC desk acts as an intermediary between the buyer and seller and typically earns a percentage of the commission on the completed transaction in exchange for its services. Unlike the principal OTC desk, an agency OTC desk doesn’t assume the risk of trading with its own funds.
Who Should Consider Using a Crypto OTC Desk?
While there are many benefits to trading via traditional cryptocurrency exchanges, many traders prefer OTC desks. For many companies in the cryptocurrency industry who are looking to automate the trading process, traditional exchanges may be a better choice. However, traders typically turn to an OTC desk when a given trade cannot be conducted via a traditional cryptocurrency exchange. Thanks to the OTC market, traders can buy and sell crypto assets that are not yet available for trade on the crypto exchanges.
Moreover, let’s not forget about the limits and restrictions imposed by the exchanges. Some of the biggest and most popular exchanges have very strict limits. For example, Coinbase limits its investors to buy cryptocurrencies for as little as $25,000 per day. Kraken allows its traders to withdraw $2,500 per day, up to $20,000 per month. What’s more, other cryptocurrency exchanges only allow you to exchange one cryptocurrency for another but not to trade fiat-to-crypto. These limits and restrictions are non-existent when using a crypto OTC desk.
Any experienced trader who wishes to trade large amounts of cryptocurrency should consider factors such as low fees, high liquidity, and high security when choosing the best crypto OTC desk for their transactions.
The Biggest Pros of Using a Crypto OTC Desk
There are many advantages to using a crypto OTC desk to trade large amounts of cryptocurrency or execute a trade that cannot be executed through a traditional crypto exchange.
The main benefit of trading on the OTC market is increased liquidity. While traditional crypto exchanges have low liquidity, OTC platforms allow traders to buy or sell large amounts of cryptocurrency without the risk of price slippage. When trading large amounts of crypto on the traditional exchanges, traders often have to break the transaction down into smaller chunks due to existing restrictions. Therefore, traders may experience spikes in prices between the transactions and run the risk of price slippage. With a professional OTC desk, this can be easily avoided.
Increased privacy is another benefit of choosing the best crypto OTC desk to execute big cryptocurrency transactions. Since trading on the OTC market is done directly between two parties, the transactions can be kept confidential. Also, unlike the traditional exchanges, the price of the deal is not publicly available, which gives traders a higher sense of trust and security. What’s more, with bigger transactions, traders may feel scared to run into a scam, get hacked, or run another potential danger due to the nature of their transactions. However, since no third party is involved, these risks are much smaller.
Why Is NextHash the Best Crypto OTC Desk?
NextHash is the best crypto OTC desk specializing in dealing with problems of sourcing large amounts of cryptocurrency. With NextHash, you will be able to trade considerable amounts of crypto assets with peace of mind. Trading with the NextHash OTC desk allows buyers and sellers to execute their transactions in minutes without paying high costs. At NextHash, we offer the lowest fees while maintaining high security and ease of use. NextHash is the best crypto OTC desk for all traders who want to trade larger amounts of cryptocurrency and save on fees. Click here for more information or get in touch with us!