The cryptocurrency market has an astounding $2 trillion value, with a total trading value that frequently reaches upward of $100 billion. With large fluctuations occurring every day, far exceeding expected margins seen in centralized stock markets, cryptocurrency trading, and investing are a common part of modern financial strategy.
Yet, for whale investors who are looking to buy or sell large quantities of crypto, going through a traditional cryptocurrency exchange can backfire. Selling a large volume of one cryptocurrency on these markets can influence its price, reducing the efficacy and profit margin of the trade itself.
To counter this, many investors turn to crypto OTC trading, utilizing this secondary market to buy or sell their cryptocurrencies with a layer of privacy. In this article, we'll explore what OTC crypto trading is, touch on who the ideal candidates are for this form of trading, and outline how to trade crypto OTC.
What Is OTC Crypto Trading?
OTC crypto trading, also known as over-the-counter trading, is a direct form of crypto trading where buyers and sellers work directly with a third-party exchange. These OTC trading exchanges are not connected to regular exchanges in that their liquidity is private and, therefore, does not impact the markets.
For investors who want to make large-scale purchases or sales without inflating or devaluing their cryptocurrency, OTC trading is an extremely useful strategy. However, not all OTC trading platforms offer the same level of service.
Typically, leading OTC crypto partners should offer the following features:
- 24/7 Access: Unlike some traditional, centralized exchanges, the best OTC crypto partners offer around-the-clock access to trading, allowing you to trade on demand at any time. This feature allows you to take advantage of small deviations in the market without being left out due to changing market hours.
- Competitive Pricing: Another major feature that you should look for in your OTC crypto trading platform is low fees. While OTC trading does incur additional fees, mainly due to your ability to access high liquidity with an additional layer of privacy, you should understand what these fees are before making a trade. Low fees and absolutely no hidden fees should be a priority when selecting a partner.
- Extensive Liquidity: Of course, the best crypto OTC platform is the one that's able to offer you liquidity in all of the cryptocurrencies or altcoins that you want to trade in.
- Streamlined Customer Experience: OTC trading should be accessible, easy to use, and intuitive. A great partner will have all of these in their trading platform, offering seamless integration with useful trading tools and systems.
By finding an OTC partner with all of these features, you'll be able to conduct OTC crypto trading on the scale you'd like without disrupting the wider market.
Who Uses OTC Crypto Trading, and Why Don't They Use Traditional Exchanges?
The main party that will want to engage in OTC crypto trading is someone who is making an abnormally large trade. While not every person using OTC trading will be a crypto whale, most clients will want to buy or sell a large volume of cryptocurrency. In this case, large volume refers to an amount that could impact the wider market if done through a traditional medium.
Parties that fit these criteria and want to proceed with OTC crypto trading will encounter a range of benefits:
- Privacy: OTC trading creates a private sale or purchase channel between a seller and a buyer. Without working through a centralized exchange, the wider market won't know that you are in the process of making a huge trade until you have fully settled.
- Price Stability: When you buy or sell large amounts of cryptocurrency, your price could be impacted by slippage. Crypto slippage is where the market prices fluctuate as you make your trades or even due to your trading activities. Working with an OTC crypto partner will avoid this completely, as they use their private source of liquidity.
- Room for Negotiation: With centralized cryptocurrency trading platforms, a customer has no say on the final price that they buy or sell a coin for—prices are set by the platform and not up for negotiation. With OTC platforms, you can create a live dialogue with your buyer or seller, settling on a price that is beneficial for all parties involved.
How to Execute a Crypto OTC Trade
Once you have found an OTC partner you want to work with, you can initiate a trade and either buy or sell your crypto or altcoins.
After creating an account on the platform or reaching out to the platform's exchange team, you can request a buy or sell quote for a specific cryptocurrency. This initial quote will give the baseline rates and fees associated with the trade.
In traditional exchanges, this would be the moment you agree to the terms and trade your cryptocurrency. In OTC trading, you can detail how much you want to trade and see how that influences the final rates you can use. Many platforms will allow you to negotiate with them to find a better price, especially if you are trading a large volume of capital at once.
Once you've settled on a price you are happy with, you can then exchange your cryptocurrency.
Final Thoughts
Crypto OTC trading is a useful strategy for individuals who are looking to make sizeable investments into crypto or sell off large volumes of their accumulated coins without impacting the wider market. As OTC occurs directly between a platform and the client, both parties are afforded a high degree of privacy, allowing everyone involved to trade without drawing attention to themselves.
Once you find a reliable partner and begin OTC trading, you'll gain access to a unique trading landscape that overcomes many of the downsides of traditional crypto trading. Be sure to carefully assess each of the potential choices of OTC crypto partners you have available to you before selecting the right platform for you.
