8 November 2021
Many traders choose over-the-counter cryptocurrency trading instead of traditional exchanges because it ensures price stability, faster transaction execution, and increased security. As crypto OTC trading is becoming more and more popular amongst experienced traders, more and more crypto OTC desks are appearing on the market.
So, how do you choose the right crypto OTC desk for your needs? In this article, we will explain what crypto OTC desks are, why you should use them, and what to consider before choosing the right one for you.
To understand what an OTC desk is, let's first explain what crypto OTC trading is. Unlike traditional cryptocurrency exchanges, OTC trading consists of trading crypto assets directly between two parties: a buyer and a seller. A seller is a person in possession of a specific amount of crypto assets they want to sell at a given price. A buyer is a person seeking to buy that specific amount of crypto assets at a price set by the seller. These transactions can be crypto-to-crypto (for example, exchanging Bitcoin for Ethereum) or fiat-to-crypto (for example, exchanging US dollars for Bitcoin). In both cases, there is a need for a mediator to help the sellers find the right buyers for the transaction and vice versa.
This is precisely what an OTC desk is. It is simply a professional platform that matches buyers with sellers to facilitate cryptocurrency transactions between them. In other words, it is a type of financial company that hires financial experts to manage transactions of crypto assets between traders.
Crypto OTC desks are used when a transaction cannot be done through the traditional cryptocurrency exchanges. This can be due to many reasons. Sometimes, the assets being exchanged via the crypto OTC desk are simply not trading on the exchanges. However, most of the time, traders choose to complete the transaction via a crypto OTC desk when they are trading large amounts of cryptocurrency. This is because trading large amounts of crypto on traditional exchanges involves higher fees. There is also a risk of price slippage.
If you are an experienced trader looking to buy or sell large amounts of cryptocurrency, you should consider using a crypto OTC desk. It is no secret that traditional cryptocurrency exchanges have very low liquidity when it comes to large transactions. Therefore, in order to execute a trade involving a large number of crypto assets through the exchange, you would need to break it down into smaller chunks. This means running the risk of price slippage. Trading via an OTC desk, however, ensures higher liquidity and no risk of price slippage.
Apart from that, since OTC trading happens directly between two parties, traders can keep the transaction private. Thus, OTC desks ensure confidentiality and privacy of their buyers and sellers, unlike traditional cryptocurrency exchanges where transactions are displayed publicly.
There are two main types of OTC desks: a principal desk and an agency desk. The main difference between principal OTC desks and agency OTC desks is that principal desks use their own funds to purchase the assets solicited by the buyer. This means that they are assuming the risk involved in the transaction instead of their customer. In other words, when trading via a principal OTC desk, you don't have to worry about all the different aspects of the transaction. On the other hand, agency desks do not use their own funds to finance crypto assets for the transaction. Instead, customers trade with their own money and pay the agency desk a fee to act as their intermediary.
Let's see how this works in practice. Let's assume that you want to buy 100BTC. In this case, the OTC desk gives you a specific price for the transaction that you can accept, counter or decline. If you accept the price stated by the OTC desk, they are now obliged to deliver 100BTC to you at a given price, running the risk of purchasing a part of it at a higher price. A principal OTC desk makes a profit by buying the 100 BTC for you at a price slightly lower than what you are expected to pay. Once they have your 100BTC ready, you are required to send the payment that you agreed upon before the desk sends you your crypto assets. At this point, you may run the risk of getting scammed by the OTC desk, which is why it is imperative to choose a reputable OTC desk.
The most thing to consider when choosing a crypto OTC desk for your transactions is their reputation. Although many new OTC desks keep appearing on the market, not all of them are reputable and worth your trust. When trading large amounts of cryptocurrency, you want to take extra care to make sure that your crypto assets are safe in the hands of the OTC desk you're choosing. A reputable, high-quality OTC desk is excellent at managing different issues that may arise, such as high volatility and illiquidity issues. A high-quality crypto OTC trading desk should also enable its traders to trade multiple cryptocurrencies and assets.
Another critical factor to consider when choosing an OTC desk is portfolio tracking. Having the possibility to track and monitor your trading portfolio will significantly improve your trading efficiency and allow you to see real-time profits and losses.
Choosing the right crypto OTC desk for your needs can greatly improve the efficiency of your transactions. At NextHash, we are dedicated to enabling our more experienced traders to buy and sell large amounts of cryptocurrency effectively, securely, and anonymously. NextHash OTC desk is also perfect for smaller investors who do not wish to list their crypto assets on traditional exchanges or pay high listing fees. At NextHash, there is no limit to your transactions! Click here for more information or get in touch with us!