14 October 2021
Over the counter (OTC) trading in crypto has become more popular in recent years. As a result, there are more and more OTC crypto desks to choose from that provide services for more experienced, high-volume cryptocurrency traders. However, many people don’t fully understand how the OTC crypto market works and the key factors that determine whether trading through an OTC desk is suitable for them. To help you gain more clarity, in this article, we will take a closer look at the OTC crypto market and the OTC crypto desks.
OTC stands for over the counter, and it is a decentralized market where different financial instruments, such as stocks, shares, and cryptocurrency, are traded. On the OTC crypto market, transactions are made directly between two parties without the need for a mediator, such as the exchange. An OTC crypto market is a decentralized cryptocurrency market. It has less strict regulations, and larger amounts of cryptocurrency can easily be traded between buyers and sellers.
The concept of the OTC crypto market is very similar to selling over-the-counter drugs at a pharmacy. These drugs still serve medical purposes, but they are not subject to strict regulations. When you go to the pharmacy to buy OTC drugs, you don’t need a prescription from your doctor. The trade happens directly between you and the pharmacist. There is no need for an external mediator, such as your doctor. You are the buyer, and your pharmacist is the seller.
On the OTC crypto market, the trade happens directly between two parties, just like in the pharmacy example. However, even though trading on the OTC crypto market happens without the strict supervision of the centralized exchanges, it does not mean that there are no intermediaries involved.
When it comes to high-volume cryptocurrency transactions, traders choose to use the help of OTC crypto brokers. The OTC crypto brokers are simply OTC platforms that play the role of market matchmakers: they match the sellers with the right buyers willing to complete the planned transaction. Going through an OTC broker can be very beneficial for traders who want to trade large amounts of cryptocurrency. It helps them avoid problems they would otherwise experience on a traditional cryptocurrency exchange, such as price slippage or costly fees.
OTC cryptocurrency translations usually take place through an OTC brokerage platform or an OTC desk. This service is also called the Principal Desk. While the Principal OTC Desk takes care of all the details and assumes all the risks, the traders only have to accept the offered transaction price. Here’s an example of how an OTC cryptocurrency transaction works.
Let’s assume that a trader wants to purchase a specific amount of Bitcoin. The first step is to find a counterpart for the trade. This can usually be done through an OTC brokering platform. Then, the OTC broker responds with the price offered for the transaction, and the traders need to accept or reject the offer. If they accept, the Principal Desk then buys the amount of Bitcoin that the trader requested at their own expense and risk from another trader looking to sell that specific amount. After the seller transfers the BTC to the OTC broker, the broker then transfers them to the buyer. In other words, principal OTC desks take the risk of buying the cryptocurrency with their own funds.
Agency Desks are another type of OTC cryptocurrency trading. Agency Desks function a little differently from the Principal Desks, as they do not assume the risk of buying the cryptocurrency at their own expense. Instead, they ask the buyer for a fixed brokerage fee that they then use to acquire the specified amount of the chosen cryptocurrency. In this approach, the buyer assumes the risk that the price might increase before the order is executed.
The most popular way to buy and sell cryptocurrency is to use a centralized exchange. However, if you’re planning on trading large amounts of cryptocurrency, your best option is to choose to trade on an OTC crypto market and through an OTC cryptocurrency broker. Here are the most popular OTC desks:
Kraken OTC Desk (with a minimum trade size of $100,000)
DRW / Cumberland
Likewise, Coinbase, Bithumb, Binance, and other cryptocurrency exchanges have their own OTC Boards reserved for clients with thick wallets.
OTC cryptocurrency brokers have been gaining more and more popularity among most experienced traders in recent years. Nowadays, many big OTC crypto brokers operate on a vast scale and trade billions of dollars every year.
However, not everyone can easily trade their cryptocurrency through the biggest and more popular OTC platforms. Most big OTC desks require traders to perform transactions larger than $100,000. However, for smaller OTC crypto desks, you can start trading crypto on transactions that initiate over $25,000.
Other problems when using the largest and most popular OTC crypto brokers are higher fees and no unique deals tailored to the specific customer. This is mainly because the largest players on the market have a lot of demand and therefore cannot customize their services to each individual client and price themselves much higher than smaller OTC desks.
The NextHash crypto OTC trading platform offers our clients the ability to buy, sell and trade large amounts of cryptocurrency at lower trading and transaction fees. If you plan to trade large amounts of cryptocurrency but want to avoid the high transaction fees required by bigger OTC brokers, the NextHash OTC platform is the right choice for you! We offer our high-volume clients a single quote price order. All you have to do is accept the offer, and we take care of delivering even larger amounts of cryptocurrency in a matter of minutes!
The NextHash crypto OTC platform is designed for big and small individual traders, institutions, VC and hedge funds, as well as miners. The biggest OTC crypto trading platforms on the market usually have a higher minimum limit on the crypto transactions traded on their platforms. So, if you are a smaller investor who still wants to buy or sell bigger volumes of cryptocurrency while avoiding substantial listing fees on well-established platforms, NextHash is the place for you. Click here or get in touch with us today!