13 June 2022
With the rapid growth of cryptocurrency in recent years and the increasing adoption by institutional investors come great opportunities and new challenges that need to be overcome. The market and new innovations are rolling out at a pace that makes the development of computers look like a snail’s pace. And trades are no longer a small niche community, the rapid increase in trades by investment firms, retail investors, banks, and even large private investors and traders, require a more robust platform to place sizable trades in the knowledge that your trade will be quick and hassle-free, and at a fixed price for the whole trade. NextHash OTC cryptocurrency trading desk Offers all this and more. So, in this introduction, we will investigate how OTC cryptocurrency trading works and break down the key reasons that you should consider using it over a traditional cryptocurrency exchange. As we will see it is not for everyone, but in certain cases, it may be the only option to get the trade done without creating a major headache.
In the financial markets, traditional and crypto, there are basically only 2 types of trades, ‘exchange’ or ‘OTC’. In traditional markets, we hear a lot about the London and New York Stock exchange and others but what most people don’t know is that the OTC markets in commodities, bonds, derivatives, and currencies constitute the vast majority of global market trades, where exchanges are only a tiny part.
In the exchange model whether traditional or crypto, the exchange acts as a mediator between the buyers and sellers. Seller’s post ‘asks’ to the exchange at the price they are willing to sell, and buyers post ‘bids’ at the price they are willing to buy. If the prices match the exchange will execute the trade, and these are the prices that are shown on the markets for each asset. This is the same whether you are looking at the Nasdaq or in the crypto world with exchanges like Coinbase or Nextinter for example.
However, in an ‘over-the-counter’ OTC cryptocurrency trade and one carried out in the traditional markets, the transaction is provided to the buyer or seller directly by an OTC cryptocurrency trading desk who will offer a single buy or sell price for the whole trade.
Let’s look at a buying example, however, this applies equally to selling. Say you want to buy a large amount of an asset on an exchange, say 200 BTC, the exchange may fill part of the order at the market rate, then start to run out of sellers at that price, so part of the order may be filled at a range of higher prices, this is called ‘slippage’ In some cases for large trades the exchange may not be able to fill the complete order at all, this is called ‘liquidity’. So, to complete your 200 BTC trade you would be left with no choice but to buy in smaller quantities across a range of exchanges and at a range of prices. And each transaction would carry its own transaction fees, so you may not know the total cost of the trade until it is completed.
This is where an OTC cryptocurrency desk like NexHash comes in. With OTC you simply ask the desk for, in this case, 200 BTC, the desk gives you a single buy price, then if you accept the price, they will complete the transaction for you and send you the BTC. The OTC trading desk must deal with finding buyers or sellers and with a range of different prices, some of which may be more than your buy price. The desk will charge a single transaction fee and will absorb all the risks of slippage, liquidity, and volatility.
Trading on an exchange is a public transaction, which may not be what you want for larger transactions. Whereas an OTC cryptocurrency trading desk is handled with a certain opacity because the desk is the entity that is out in the market buying the assets to complete the deal. So, if the privacy of your financial transactions is important to you, then OTC is for you.
Generally, if you are buying or selling large amounts of crypto assets or large trades between crypto and fiat money, you should be using OTC rather than an exchange. If you are an institutional trader or investor that needs a secure and personalized service.
There are 2 different types of OTC desk ‘principal’ and ‘agency’ A principal OTC cryptocurrency trading desk uses its own funds to facilitate the trade, only then collecting payment for the assets and the commission from the customer.
Whereas an agency desk facilitates the trade using the customer’s funds and then charges a fee for the transaction. Still, this type of OTC cryptocurrency desk still has the benefit of a fixed bid price and a hassle-free private trade.
Next Hash provides both exchange facilities in the form of our Nextinter exchange, which is a low trading and transaction fee, fully regulated exchange, with a custodian license.
And, our NextHash OTC cryptocurrency trading desk facility, with fast executions, simplified procedures, and single quote price orders.
Nexinter provides personalized service to facilitate large trades in a secure and private environment away from the public scrutiny of exchanges.
We remove the risk of volatility and slippage from your large trades. Simply accept a single buy or sell price and the NextHash OTC cryptocurrency desk will handle the rest for a single fixed transaction fee for the whole trade.
NexHash OTC cryptocurrency trades are fast, private, and secure with some of the lowest transaction fees on the market. Sign up to NextHash today for a full suite of OTC and exchange trading solutions.