What Crypto OTC Desks You Should Consider Using Today?
Many traders choose over-the-counter cryptocurrency trading instead of traditional exchanges because it ensures price stability, faster transaction execution, and increased security. As crypto OTC trading is becoming more and more popular amongst experienced traders, more and more crypto OTC desks are appearing on the market.
So, how do you choose the right crypto OTC desk for your needs? In this article, we will explain what crypto OTC desks are, why you should use them, and what to consider before choosing the right one for you.
What Is a Crypto OTC Desk?
To understand what an OTC desk is, let’s first explain what crypto OTC trading is. Unlike traditional cryptocurrency exchanges, OTC trading consists of trading crypto assets directly between two parties: a buyer and a seller. A seller is a person in possession of a specific amount of crypto assets they want to sell at a given price. A buyer is a person seeking to buy that specific amount of crypto assets at a price set by the seller. These transactions can be crypto-to-crypto (for example, exchanging Bitcoin for Ethereum) or fiat-to-crypto (for example, exchanging US dollars for Bitcoin). In both cases, there is a need for a mediator to help the sellers find the right buyers for the transaction and vice versa.
This is precisely what an OTC desk is. It is simply a professional platform that matches buyers with sellers to facilitate cryptocurrency transactions between them. In other words, it is a type of financial company that hires financial experts to manage transactions of crypto assets between traders.
Crypto OTC desks are used when a transaction cannot be done through the traditional cryptocurrency exchanges. This can be due to many reasons. Sometimes, the assets being exchanged via the crypto OTC desk are simply not trading on the exchanges. However, most of the time, traders choose to complete the transaction via a crypto OTC desk when they are trading large amounts of cryptocurrency. This is because trading large amounts of crypto on traditional exchanges involves higher fees. There is also a risk of price slippage.
Why Should You Use a Crypto OTC Desk?
If you are an experienced trader looking to buy or sell large amounts of cryptocurrency, you should consider using a crypto OTC desk. It is no secret that traditional cryptocurrency exchanges have very low liquidity when it comes to large transactions. Therefore, in order to execute a trade involving a large number of crypto assets through the exchange, you would need to break it down into smaller chunks. This means running the risk of price slippage. Trading via an OTC desk, however, ensures higher liquidity and no risk of price slippage.
Apart from that, since OTC trading happens directly between two parties, traders can keep the transaction private. Thus, OTC desks ensure confidentiality and privacy of their buyers and sellers, unlike traditional cryptocurrency exchanges where transactions are displayed publicly.
What Is The Difference Between a Principal OTC Desk And an Agency OTC Desk?
There are two main types of OTC desks: a principal desk and an agency desk. The main difference between principal OTC desks and agency OTC desks is that principal desks use their own funds to purchase the assets solicited by the buyer. This means that they are assuming the risk involved in the transaction instead of their customer. In other words, when trading via a principal OTC desk, you don’t have to worry about all the different aspects of the transaction. On the other hand, agency desks do not use their own funds to finance crypto assets for the transaction. Instead, customers trade with their own money and pay the agency desk a fee to act as their intermediary.
Let’s see how this works in practice. Let’s assume that you want to buy 100BTC. In this case, the OTC desk gives you a specific price for the transaction that you can accept, counter or decline. If you accept the price stated by the OTC desk, they are now obliged to deliver 100BTC to you at a given price, running the risk of purchasing a part of it at a higher price. A principal OTC desk makes a profit by buying the 100 BTC for you at a price slightly lower than what you are expected to pay. Once they have your 100BTC ready, you are required to send the payment that you agreed upon before the desk sends you your crypto assets. At this point, you may run the risk of getting scammed by the OTC desk, which is why it is imperative to choose a reputable OTC desk.
What Should You Consider Before Choosing an OTC Desk?
The most thing to consider when choosing a crypto OTC desk for your transactions is their reputation. Although many new OTC desks keep appearing on the market, not all of them are reputable and worth your trust. When trading large amounts of cryptocurrency, you want to take extra care to make sure that your crypto assets are safe in the hands of the OTC desk you’re choosing. A reputable, high-quality OTC desk is excellent at managing different issues that may arise, such as high volatility and illiquidity issues. A high-quality crypto OTC trading desk should also enable its traders to trade multiple cryptocurrencies and assets.
Another critical factor to consider when choosing an OTC desk is portfolio tracking. Having the possibility to track and monitor your trading portfolio will significantly improve your trading efficiency and allow you to see real-time profits and losses.
The Most Effective Crypto OTC Desk
Choosing the right crypto OTC desk for your needs can greatly improve the efficiency of your transactions. At NextHash, we are dedicated to enabling our more experienced traders to buy and sell large amounts of cryptocurrency effectively, securely, and anonymously. NextHash OTC desk is also perfect for smaller investors who do not wish to list their crypto assets on traditional exchanges or pay high listing fees. At NextHash, there is no limit to your transactions! Click here for more information or get in touch with us!
How does crypto OTC actually work?
Over-the-counter (OTC) trading desks like Circle Trade play an essential role in the crypto industry but few people understand why they’re important, how they work, and what separates one from another. As part of our mission to provide you with key market insights, we at Circle Research put together an in-depth look at the relevance, structure and taxonomy of crypto trading desks.
Similar to their counterparts in traditional finance, crypto OTC desks deal in immense volumes with seeming opacity, outside the periphery of the public eye. In this article, we’ll aim to bring clarity to how crypto OTC actually works.
What are OTC markets?
There are two basic ways of organizing financial markets — exchange and “over the counter”, or OTC.
Exchanges such as the New York Stock Exchange or a crypto-equivalent like Poloniex essentially act as mediators between buyers and sellers. Traders post prices they are willing to sell assets for (asks) and others post prices they are willing to buy assets for (bids). When a bid and an ask overlap, the exchange facilitates the trade. All trades happen out in the open and the prices that different assets trade for are what you see scrolling across the bottom of CNBC or on a website like CoinMarketCap.
OTC differs in that trade happens directly between two parties, with one of those parties typically being a “desk” — a business dedicated to the buying and selling of a particular asset class. In an OTC trade, two parties agree on a price and then work out the transfer of assets between themselves. This direct medium of exchange is the precise reason such opacity exists within OTC markets — no one beyond the parties involved is privy to the price and volume in which various assets are trading at “over the counter.”
In traditional markets, more US companies’ shares trade OTC (about 10,000) than on the Nasdaq and NYSE combined. Trillions of dollars in bonds, commodities, currencies, derivatives such as the infamous mortgage backed securities influential during the 2008 financial crisis, and scores of other complex financial instruments trade OTC each year. The derivative OTC markets alone account for $600+ trillion in notional value every year.
In short, OTC markets are where the majority of trade within the global financial system takes place.
What is crypto OTC?
Crypto OTC is simply the trading of crypto assets directly between two parties. A trade can be crypto-to-crypto (swapping Bitcoin with Ether for example) or fiat-to-crypto (swapping US dollars for Bitcoin and vice versa).
As with all other OTC markets, trade always occurs between a dedicated trading “desk” and another individual or institution, referred to as a counterparty. In 2018, billions of dollars worth of crypto changed hands over the counter.
Why do crypto OTC desks exist?
Mainly, because buying or selling large amounts of crypto is difficult. For example, If you were to try to buy 500 BTC you would run into a host of issues.
If you attempted to buy it all on one exchange, odds are that no one person is selling 500 BTC at any given time — you would have to buy it from multiple sellers. You’d likely be able to buy the first chunk at the going market rate, but would end up buying the last chunk at a significantly higher price — this is known as slippage. Slippage occurs when you run out of people selling at your desired price, causing you to “slip” further from the original market price.
To avoid slippage, you would be better off spreading your purchase of 500 BTC around multiple exchanges, buying smaller chunks of BTC at the best price available on each exchange. Actually doing this however, would require you to be onboarded with multiple exchanges and even then you would spend a great deal of time executing each individual trade, all while getting charged a transaction fee per trade.
If you went to a type of crypto OTC desk known as a principal desk, they would quote you one price and if you accept, they’ll send you 500 BTC — simple as that. Where and how they get it from is not your problem — it’s theirs. Dealing with the problem of sourcing large amounts of crypto is exactly what crypto OTC desks excel at. Through them, you can buy your 500 BTC all in one shot with no fees, and without doing any of the legwork.
How a principal desk works
Principal is derived from the term, “principal risk.” When you trade with a principal desk, they use their own funds to purchase whatever asset you are buying, assuming risk in the process. This is the model employed by Circle Trade.
Returning to our 500 BTC example, you would start by requesting a quote through a chat application. Next, one of the desk’s traders will respond with a price based on current market rates and conditions — let’s say, $4,000 per BTC. At this point, you can decline, counter or accept. The moment you accept via chat, the desk is obligated to deliver you 500 BTC at $4,000 a piece, per a legal agreement signed during the onboarding process.
At this point, the desk taps into its existing network of major exchanges and other OTC desks and figures out the optimal way of sourcing 500 BTC. Since the desk is using its own funds to buy the 500 BTC they are assuming risk — the risk that the price of BTC will start spiking above $4,000 before they can source all 500 of it.
The aim of the desk is to source the 500 BTC for an average price slightly under $4,000 per BTC in order to make a profit — the difference between the average price the desk obtains it for and the price it sells it to you for is known as a spread.
Once the desk sources your 500 BTC, you’ll receive instructions on where to wire your funds ($2M in this case). The desk will not send the BTC until they receive the wire. In this sense, you risk the desk walking away with your $2M, which is why the reputation of whatever desk you’re dealing with is of critical importance. Once the desk receives the wire, they’ll send you 500 BTC and the trade is complete.
The agency model
There is a second type of OTC desk called an agency desk. Contrary to a principal desk, agency desks do not trade with their own funds and thus, do not assume market risk. Instead of a spread based model, agency desks charge a fee to act as a middleman to broker a deal on behalf of a counterparty.
If you were to buy 500 BTC from an agency desk, you would first fund an account with them and then offer a range you are willing to buy it for. The agency desk will then go and attempt to purchase 500 BTC with your funds at an agreed upon price. In this scenario your risk is that the price of BTC spikes before your agent can complete the purchase and cannot fill your order.
Many companies that offer custody as a service (storing your crypto for you), run agency desks as a value add. Since they are already holding your funds, they will also buy and sell your assets on your behalf. This contrasts to principal desks that typically will only accept fiat or crypto associated with a specific trade.
Who trades crypto OTC?
Simply put, anyone who wants to quickly and easily buy or sell large amounts of crypto. This can be high net worth individuals, institutions, VC and hedge funds that invest in crypto markets. OTC desks also frequently trade with each other, when for example, one desk has a counterparty looking to buy a particular asset and another desk has a seller.
With the growth of the industry and asset class, the types of counterparties OTC desks trade with has become more diverse over the years. As ICOs took off in 2017, large amount of funds were being raised in Ether and project founders commonly used OTC desks to convert Ether into fiat to pay day-to-day expenses. Miners — the people who get paid in newly minted crypto to run computers that secure networks like bitcoin — use OTC desks to convert crypto into their local fiat currencies in order to pay expenses. Similarly, an exchange that collects fees in crypto will trade OTC to convert back into fiat or increasingly, into stablecoins like USDC.
The future of crypto OTC
Five years ago, crypto OTC desks did not exist with the structure and scope that they do today. Now there are multiple desks operating on a global scale, trading billions of dollars a year — a reflection of how much this industry has grown since the bitcoin network launched ten years ago.
While the billions of dollars that crypto OTC desks handle annually pale in comparison to the trillion dollar volumes of traditional OTC counterparts, there remains tremendous room for growth. As existing crypto assets grow and as new ones are introduced, OTC desks like Circle Trade will be there behind the scenes, keeping the markets moving.
Thanks to Bea O’Carroll, Nick Gustafson, Cody White & Yinfeng Shao of Circle Trade for helping inform this article.
If you want to learn more about crypto OTC desks, check out this Flippening podcast from Nomics Crypto, that also helped inform this article.
For more research and insights, subscribe to Circle Research.
Reports, market insights, and other information (“Information”) provided by Circle Internet Financial Limited (“Circle”) or its affiliates have been prepared solely for informative purposes and should not be the basis for making investment decisions or be construed as a recommendation to engage in investment transactions or be taken to suggest an investment strategy in respect of any financial instruments or the issuers thereof. Information has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research under the Market Abuse Regulation (EU) No 596/2014. Information provided is not related to the provision of advisory services regarding investment, tax, legal, financial, accounting, consulting or any other related services and is not a recommendation to buy, sell, or hold any asset. Information is based on sources considered to be reliable, but not guaranteed, to be accurate or complete. Any opinions or estimates expressed herein reflect a judgment made as of the date of publication, and are subject to change without notice. Trading and investing in digital assets involves significant risks including price volatility and illiquidity and may not be suitable for all investors. Circle and its affiliates trade and hold positions in digital assets and may now or in the future trade or hold a position in an asset that is the subject of Information provided. As a result, Circle or its affiliates may be subject to certain conflicts of interest in connection with the provision of Information. Circle will not be liable whatsoever for any direct or consequential loss arising from the use of this Information.
Otc desk что это
OTC подразделение биржи Huobi Russia – это возможность крупных внебиржевых сделок, а так же P2P платформа для проведения торговых операций между пользователями, используя фиатные деньги.
ОТС расшифровывается как «Over The Counter», что в переводе с английского означает «минуя прилавок». Этим термином обозначают внебиржевые сделки, которые заключаются напрямую между продавцом и покупателем, обычно при содействии третьей стороны.
Сегодня рынок ОТС очень популярен среди крупных игроков, т.к. позволяет осуществлять сделки на крупные объемы.
Объем ежедневной внебиржевой торговли, даже по самым скромным подсчетам, достигает от 100 миллионов долларов.
What does a Cryptocurrency OTC Desk do?
This article discusses how trading works for Over-The-Counter “OTC” digital currencies. We explore why, how, and when to hire a cryptos OTC desk. And, will go behind-the-scenes with Bea O’Carroll, a top financial professional working in the space.
Decentralized trading OTC, means that an investor or seller is able to avoid (“divert”) the traditional market counter. Between a crypto seller and a buyer, who wants to deal directly with each other, OTC cryptocurrency trades create temporary relationships. These relationships most often occur with assistance of a third-party service: a digital currencies (“cryptos”) OTC desk.
An OTC desk for cryptos is a type of financial company that hires financial professionals to work exclusively with coordinating and managing digital asset transactions. OTC trades are already becoming known for providing cryptocurrency price stability, high-speed transaction execution, ultimate convenience, increased security, and confidentiality.
The Crypto OTC Desk
While OTC trading of cryptocurrencies has been compared to do-it-yourself stock trading, the differences are clear. At-a-glance, a digital assets OTC desk is different from a traditional OTC desk because OTC desks are not required to work with a market representative to execute trades. This is not completely free of cost, since trading OTC still charges trading fees. But, OTC desks do not charge broker fees. When compared to traditional market trades, the 24/7/365 cryptos OTC trading experience offers superior market access and control.
Other conditions of working with a cryptos OTC desk include:
- Transactions are dependent on buyers and sellers obtaining KYC and AML clearance
- Traders must meet transaction minimums
- Traders must gain approvals of residence corporate jurisdiction
- Crypto OTC desk operators are NOT able to provide you with advice
Why Choose an OTC Service
Liquidity and User Experience
Exchanges are open marketplaces where trades of securities and other financial instruments occur. Securities are mostly traded on traditional exchanges. In cryptocurrency, exchanges mainly focus on trading cryptocurrencies which are evaluated by compliance officers and regulators on a project by project basis for a number of attributes including whether or not they are a security or utility. Many cryptocurrencies fall outside of the definition of securities, such as Dash. People working as dealers, investors, and brokers, are centralized in order to monitor markets. Including, to standardize buying and selling of instruments, and for fraud-prevention.
OTC trades are a common tool in the traditional financial market, but different from trades on a stock exchange. To carry out a large trade on a traditional stock exchange, small transactions are required with varying rates. At the time of each small trade, the market’s liquidity and volatility determine how many transfers are needed.
Diving into the pool of opportunities and liquidity risks, meet Bea O’Carroll. Bea is a US-based principal of an OTC desk for digital currencies. NYC based, she represents NautilusTech. NautilusTech is a US trading desk and company, with Prycto being the parent company. In brief, NautilusTech provides whiteglove services (marked by custom care and attention) for those who prefer traditional ways of working with OTCs.
“Given the limitations faced when transacting large amounts with non-OTC services, many must work with an OTC, regardless of the effort it will take them. But, for those who want to make large transactions quickly, efficiently, and digitally, Prycto’s easy-to-use platform makes the grade. Their lower-than-average minimums, and low fees, allows more groups to work with them.”
As Bea mentioned, liquidity definitely contributes to the user experience of an OTC, yet it can also make it necessary to use an OTC. However that is not always enough for an OTC to be competitive, as Bea implies. OTCs need to compete with each other, and the user experience of the trade or a given platform can be the difference between two great OTCs. Having great liquidity can also help with speed, depending on the OTC. As we know, speed of a transaction can make a large impact on user experience.
Business Development Manager and former IFC, World Bank Group Officer, Omar Hamwi, spent the whole of last year planning and coordinating the Dash FastPass network program, aligning with major partners and closing those deals. Including, working with Bea O’Carroll. Since launch, the results are clear, and FastPass network continues to grow at lightning speeds.
Omar mentions the importance of Bea and Prycto’s work: “Any business would do well to look at user experience as ways to attract and retain users. No one understands this better than Bea and Prycto. They are gems. Bea, who leads Prycto’s USA operations, is one of the most client-focused people I have met. In a market where scams are common, client-focused attention to detail cultivates much-needed trust.”
To summarize, selecting an OTC is important in order to help mitigate the risks of fraud, slippage, and generally getting the best price for your trade.
Selecting a Crypto OTC Service
Reputation
You will need to select an OTC service to complete an OTC trade. Not all OTC trading service providers are reputable. The very finest crypto OTC trading service providers take deeper care, and form a customer-centric workflow that showcases innovations like escrow, syndication, and lending. Top crypto OTC providers are able to quickly adapt to the movements of new and sensitive markets. These companies provide vital services related to cryptocurrency pricing, liquidity, news and market information.
We suggest that you choose a provider based on their reputation for conducting transactions in ever-growing markets. They also need to be great at understanding and responding to high volatility, illiquidity issues, and algorithmic trading practices. The major convenience is that OTC providers give investors a single price with individualized solutions. This happens without having to work with a broker. However, purchasers of cryptocurrencies from OTC markets are still required to complete Know Your Customer (KYC) and Anti-Money Laundering (AML) processes to prove identity to the OTC service provider.
Put more elegantly by Bea, “To anyone interested in trading digital assets, my advice is to do your homework beginning with security measures. Crypto trading has a lot of operational intricacies that you wouldn’t expect and there are many ways that someone new to the space may make an error or get hacked/ scammed.”
Liquidity and Privacy
There is a word that strikes fear into the heart of crypto traders: Liquidity. As corporations and operating budgets grow, a greater and more consistent liquidity, at lowest-possible cost to companies, will be expected.
In an excerpt from a cointelegraph.com article, “Crypto OTC Trading, Explained” an explanation is provided as to why people select OTC trading vs. trading on a cryptocurrency exchange:
“If you are seeking higher liquidity, combined with a decent level of anonymity, OTC trading might be an elegant solution for you… The experts agree that major exchanges usually have lower liquidity than what is ideal. This is why you might rather use OTC trading if you are looking to invest more… If you apply to OTC trading, the transaction is performed directly and does not show up in order books, which is why it will not affect the price. Moreover, if you are investing in a lot of bitcoin or any other crypto asset, you might want to protect your identity and keep the deal anonymous.”
Those “whales” with massive cryptocurrencies holdings still seem to prefer that their large trades do NOT draw attention. In traditional markets, this means they must hire specialized brokers. As you can imagine – even High Networth Individuals trading on regular exchanges – are regularly inconvenienced whenever they must honor limits to their daily and monthly trading.
Omar Hamwi suggests that there is a third reason, which is: “…to not hit the blockchain. OTCs are good at offloading crypto too. They do this mainly by selling small amounts over a period of time so that the price of the crypto doesn’t plummet. For example a $10 mil sell of a crypto outside of the top 10 could measurably move the price of the cryptocurrency downwards. This is not an unusual size of an OTC trade. Depending on the liquidity of the coin available, the effects of a large purchase or sale can vary. For example, it would unlikely impact bitcoin too much given the sheet size.”
If you support a particular project and yet want to sell a large holding of a cryptocurency, going through an OTC can help prevent a flash crash of the cryptocurrency.
Users’ Demands and Instant Experiences
Cryptocurrency user experience has made leaps forward in the past few years, however, for new users exploring services deeper in the cryptocurrency trading ecosystem, there is usually a learning curve critics cite as a barrier to entry.
Omar Hamwi added “As an example, people standing in a grocery checkout line are more likely to prefer to pay with fiat. Our habits around fiat make it seem as though obtaining and paying with cash is easier than crypto with fewer steps to take. Though if those same people tried doing something outside of their day-to-day usage of fiat, for example conducting a wire transfer to another country, they will quickly learn that it can require effort and education. This is the same as OTC transactions, which require spending time, coordination, and effort on the user’s part. This is why long-term, users are likely to stay with a particular OTC service, until something with a better UX comes along.”
Currently, only a certain number of today’s cryptocurrency exchanges could satisfy corporate liquidity demands. What’s more, there are still issues with security in trading cryptocurrencies that hinder market growth. Liquidity can hinder speed, or even result in slippage, both of which would lower user experience. OTCs today have recognized the need for a seamless experience. For that reason and to help scale their business, many OTCs have been launching platforms. A platform can have other additional benefits for an OTC such as lower trade minimums, opening OTC services to a greater portion of cryptocurrency traders.
Like exchanges, speed is important with OTC platforms, the longer a trade takes to complete, the higher the risk that the seller may miss a particular market opportunity.
Omar Hamwi stated “A network that never sleeps, the Dash FastPass network was built to solve cryptocurrency payments inconveniences during daily life. When paying at the register anywhere with cryptos, it takes most mobile payments users multiple steps and applications to complete the transaction. FastPass is currently for trading, so it solves problems in trading at the moment. User experience is critical to gaining adoption of any new technology or product. With Dash platform and network, the financial ecosystem now has correct solutions for solving today’s real problems. And, with near-instant blockchain transaction speeds.”
The lesson here is, when selecting an OTC, make sure the user experience is as seamless as possible. The speed of a transaction with an OTC can vary depending on the model, who the counter-party is, liquidity, the cryptocurrency pair and pricing (what are you buying and what you would like to receive), an OTC’s limit, overall market conditions, etc.
If you find an OTC you trust, at prices you agree with, and can conduct the trade quicker than others, you are likely in great hands.