What Is Crypto OTC Trading: Pros and Cons of Using OTC to Buy/Sell Crypto?
Over-the-counter, or OCT crypto trading is buying and selling crypto via an automated exchange. Normally, it is used for dealing with huge sums, something like when Microstrategy buys their billion worth Bitcoins via OTC desks managed by Kraken.
What Is OTC Trading Crypto?
Even though it looks like OTC trading crypto is mostly for the rich ones, it is far from the truth. This term can also be used in relation to peer-to-peer platforms where any sums can be bought and sold. Even ATMs can be considered as OTC desks if their transactions aren’t always performed via an exchange.
How Does OTC Trading Work?
OTC trading is exchanging assets between users in a closed environment. The involved parties determine the price, not the exchange. A trade occurs when both parties agree on the trade’s conditions. Under trades, we mean here crypto-to-crypto swaps or fiat-to-crypto swaps. In whatever case, a special market called crypto OTC desk is needed.
Differences from Other Forms of Trading
Using crypto over the counter trading platform is different from other ways to buy and sell crypto. It entails using funds to purchase an asset upon request. A request is placed on a crypto OTC trading platform, and market traders respond to this request with their conditions.
The requester can accept or decline the deal. To make a wise decision, the requester has to research the ways to purchase the asset and choose the best one. This is where the risk lies. The crypto market is highly volatile. While all the agreements are being made, the asset price may change a lot.
Why Use a Crypto OTC Trading Desk?
Using an OTC crypto trading desk is comfortable for companies or individuals dealing with significant amounts. If one wants to buy 1,000 BTC, it will be difficult to make the purchase from a single buyer. Trying to do so by dealing with many buyers increases the stress level, time spent, and delays may impact the asset price negatively. While with the OTC desks, it is possible to do within a single order.
The Advantages of Trading with a Crypto OTC Market Desk
For over-the-counter trading, liquidity is important. The high liquidity level is one of the main benefits to consider when selecting an OTC crypto.
Another important factor is confidentiality. OTC deals are one-to-one deals, within third parties between the traders.
Transfers are performed directly, without any intermediaries. It saves traders from scam schemes that in most cases act as intermediaries.
Disadvantages of Trading on the Crypto OTC Market Desk
The main disadvantage is the high market volatility. With big sums, even the smallest delay can lead to significant losses.
Can You Trust an OTC Deal?
In OTC trading, there is a high level of trust. The main source of the trustworthiness is the reputation of the OTC desk providers and the use of services of trusted parties.
Another detail that helps to ensure trustworthiness is the KYC process. A KYC form is the main form for OTC provided to ensure that network participants use legal funds. It also helps to validate whether the funds are available to enter an OTC deal.
Conclusion
OTC trading is convenient for those who want to swap big sums fast and without the details being disclosed to third parties. If this is your case, OTC may be the best option to choose.
FAQ
Is crypto traded OTC?
Yes, cryptocurrency is traded OTC.
What is OTC Binance?
OTC Binance is an over-the-counter desk managed by Binance. It works like any other OTC desk.
What is OTC NFT?
OTC NFT trade NFTs just like any other OTC desks trade assets such as crypto, fiat, etc. OpenSea and Coinbase NFT are the typical examples of NFT marketplaces that can be characterized as OTC desks.
What is an OTC deal?
An OTC deal is a deal between two participants when one sells an asset, and the other participant buys it.
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