What is OTC Trading in Crypto and How Does it Work?

The cryptocurrency industry has been growing exponentially since the Bitcoin network launched in 2009. There are billions of dollars being traded in crypto every year, and there is tremendous potential for even more growth. As more and more people start trading on the cryptocurrency market, OTC trading in crypto is becoming a more and more popular way of trading. 

OTC markets are still a mystery to many cryptocurrency traders. Even though it is widely used in traditional financial markets, OTC trading in crypto still leaves many questions unanswered. There is also a lot of misconceptions surrounding it. In this article, we will explain in simple terms what is OTC trading in crypto and how it works. 


Traditional markets vs. crypto markets? 

OTC trading stands for over-the-counter trading, and it is a term used to describe the process of trading financial assets directly between two parties without the need to go through a central exchange. Another term that needs explaining is an OTC market. An OTC market is a decentralized market where traders and brokers can trade stocks, shares, currencies, and other financial instruments directly between each other and without a mediator. This is where the majority of trading transactions within the financial market take place. Foreign exchange, or FOREX, is the most popular OTC market since currencies are not traded on traditional exchanges but through a network of banks.

OTC markets and exchange markets are two ways of organizing financial markets. Exchange markets, such as the New York Stock Exchange or the NASDAQ, work as mediators between buyers and sellers and facilitate the trade of financial assets between them. All of this happens in the open with the prices of different financial assets visible on dedicated websites and all the transactions publicly displayed. Traditional stock markets take place in a physical location. OTC markets operate entirely online and have no physical location. Instead, they consist of a group of networks managed by brokers and dealers through the internet. An OTC market also means a group of companies that serve as a market maker, such as OTC Markets Group or FINRA. 

Over-the-counter trading is also called off-exchange trading. As the name suggests, OTC means that the trade is made directly between two parties and without the need for a mediator, such as the NYSE. The way this works is that both parties agree on a price of the financial assets they want to trade and transfer those assets between themselves. Since the trading is done directly between the dealers and the traders, the prices and quantities of the traded financial assets are private to them. 


What is OTC Trading in Crypto?

Now that you have a better understanding of what OTC trading means, let’s take a closer look at what is OTC trading in crypto. Crypto OTC trading simply means trading cryptocurrency on the decentralized markets - so, directly between the trader and the broker and without a mediator. This can be done both as crypto-to-crypto trade (meaning, exchanging one cryptocurrency for another - for example, Bitcoin to Ethereum) or fiat-to-crypto (meaning, exchanging traditional currency for cryptocurrency, and vice versa). 


What is a Crypto OTC Trading Desk?

There are two parties involved in OTC trading in crypto: a “desk” and a buyer, usually referred to as a “counterparty”. An OTC crypto trading desk is simply a company hiring multiple traders. These companies buy and sell large amounts of cryptocurrencies outside of the public exchanges quickly and easily. These “desks” are necessary because investing in large quantities of cryptocurrencies (transactions that are usually over 25.000 US dollars) could be otherwise more complicated. However, if you purchase it through an OTC crypto trading desk, you’ll be able to buy a large amount of your chosen cryptocurrency at once and without having to go through all the potential trouble and risk. 


Benefits of Trading via a Crypto OTC Trading Desk

When it comes to trading large amounts of cryptocurrencies, it can become quite complicated. This is why there are various benefits of using a crypto OTC trading desk. Crypto OTC trading desks guarantee fast, private, and secure trading of your cryptocurrency.  

The main benefit of using a crypto OTC desk to buy and sell large amounts of cryptocurrencies is avoiding price slippage. When purchasing a large amount of cryptocurrency, you’d need to purchase smaller parts from various individual sellers rather than all of it at once. This can cause something called “price slippage”. Price slippage happens when you end up buying the last chunks of your chosen cryptocurrency at a higher price than the original market price that you purchased the first few chunks with. This means that you end up paying more than you planned. 

Another benefit of using a crypto OTC desk to trade large amounts of crypto is high liquidity. OTC trading desks have a network of buyers and sellers who are always willing to trade cryptocurrencies at different prices and quantities. This means that there’s less risk involved for you because there will always be someone on the other end willing to buy your crypto or sell you theirs.

Why Choose NextHash as Your Crypto OTC Trading Platform?

NextHash is a crypto OTC trading platform for cryptocurrency investors looking to buy or sell large amounts of cryptocurrencies quickly and easily. NextHash can help you avoid going through a complicated process and losing money on price slippage, as it specializes in trading large amounts of crypto. By choosing to trade with NextHash, you’ll be saving yourself a lot of trouble. Our platform allows you to buy and sell as much crypto as you desire. If you’re a smaller investor, the NextHash OTC crypto platform is also an excellent solution for you. It helps you avoid listing your crypto assets on traditional exchanges and paying considerable amounts of money for the listing fees. Whether you’re trading large amounts of crypto or just want to avoid going through traditional exchange markets, NextHash is the right platform for you! If you would also like more answers to topics like what is OTC trading in crypto, be sure to read more on our blog section. Click here and contact us for more information.