In cryptocurrency, OTC (Over-the-Counter) trading involves large deals between buyers and sellers done directly, rather than using an exchange’s public order book. Institutional investors, wealthy individuals, and companies typically conduct OTC trades when trading large quantities of crypto without incurring slippage and market impact.
OTC markets offer customized service that allows clients to trade directly with a counterparty and not on an exchange so that they may buy/sell virtually any amount of bitcoin at a price they agree upon while keeping price changes on the open market at a minimum. These platforms operate as intermediaries, facilitating secure and discreet transactions.
Advantages of OTC Trading
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Low price slippage: Huge trades on public exchanges can alter the market price. OTC trades are conducted off-exchange, avoiding such slippage.
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Personalized service: OTC platforms offer personalized services like market analysis, favorable pricing, and individualized solutions.
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Liquidity availability: OTC platforms have significant liquidity for large trades, providing instant execution.
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Fixed rate: The rate is agreed upon ahead of time so no changes in pricing occur.
Disadvantages of OTC Trading
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Greater entry barriers: OTC trading is usually only an option for significant trades, frequently with minimum amounts in the tens or hundreds of thousands of dollars.
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Counterparty risk: Trust in the OTC platform or counterparty is important to avoid Ponzi and other types of frauds.
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Regulatory issues: Depending on the jurisdiction, OTC transactions may face legal or compliance challenges.
Crypto Exchanges Supporting OTC Trading
- Binance (Binance was founded in 2017 by Changpeng Zhao (known as CZ) and has since become the most popular and technologically advanced cryptocurrency exchange in the world.).
- Bybit (Bybit is known among the crypto community as an exchange that often holds promotions and gives out rewards.).
- OKX (OKX is user-focused first and foremost. They relied on maximum convenience and speed of the exchange, and OKX does this very well. In addition, OKX has its own and very convenient decentralized wallet to store tokens securely.).
- Gate.io (Gate.io, established in 2013, is one of the most comprehensive cryptocurrency exchanges in the market today.).
- HTX (Huobi) (HTX is a trusted crypto exchange that has been operating since 2013 and has over 47 million users worldwide.).
- Bitfinex (Founded in 2012, Bitfinex is one of the oldest cryptocurrency exchanges, offering a wide array of advanced trading features.).
- XT.com (XT.com was founded in 2018 and operates worldwide, but is especially popular in Asia. XT is not just a cryptocurrency exchange where you can trade cryptocurrencies, but an entire ecosystem for trading, earning, and borrowing cryptocurrency.).
- CoinW (Founded in 2017, CoinW has become a significant player in the global cryptocurrency exchange space, serving over 7 million users across more than 120 countries. ).
How to Start OTC Trading on Exchanges
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Register: Sign up on an exchange that offers OTC services and complete the KYC/AML verification.
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Contact the OTC Platform: Reach out to the exchange's OTC platform to discuss your trading needs and to receive a price quote. Agree on the terms, such as price, quantity, and payment conditions.
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Deposit: Fund your account with the necessary cryptocurrency or fiat currency.
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Execute the Trade: The OTC platform facilitates the trade and ensures a secure and timely settlement.
Cryptocurrency OTC (Over-the-counter) trading is an essential service for high-volume traders who require privacy, low slippage, and personalized service. Despite the liquidity and security benefits of OTC trading, traders must choose reliable platforms and be aware of the associated risks. OTC platforms provide a bridge for institutions and affluent individuals to navigate the highly volatile crypto market with a streamlined approach.
