Cryptocurrency OTC trading breakdown November 2018

OTC trading: the big trader’s way

Have you ever asked yourself how Bitcoin’s early adopters switch out cryptocurrency for fiat? Have you ever wondered how crypto hedge funds like Pantera Capital make multi-million dollar trades daily while minimizing risk? Or, are you high earner looking to get a slice of what might be the next digital boom? In all three scenarios, the buying and selling of cryptocurrencies is conducted over an “off the books” variation of cryptocurrency trading known as Over-The-Counter (OTC). Sometimes referred to as dark pool trading, this generally unreported and unaudited crypto market is thought to be a larger – in terms of daily trading volume – than the regular avenues for trading cryptocurrency.   Cryptocurrency OTC, OTC trading, OTC  

What is OTC trading?

As mentioned before, this form of trading is done off of regular crypto exchanges such as Binance and Coinbase, however, exchanges like Huobi do offer OTC services. As opposed to the very open nature of trades done over an exchange, typically, an OTC trade will be handled by brokers who match a large buy with a large sell. As this generally involves large sums (with minimum amounts ranging between $75 000 and $250 000 US dollars), there SHOULD be sufficient KYC and AML related procedure involved. However, there are other methods of OTC trading, these include purchasing Bitcoin via a Bitcoin ATM or one do it via a chatroom.  

Okay, but does OTC work? 

When trading OTC via brokers, the first item on the broker’s checklist is securing a counterparty/counterparties to match the particular trade, be it a purchase or a selloff. This would then be followed by a negotiation between the broker and interested parties in order to find a common price to suit all parties.   The buyer/s will put forward the amount of Bitcoin they’re looking to buy, by when they would like the trade to take place and of course the price they are willing to pay for it. This is followed by the seller’s counter offer, which is typically a price that is a percentage above what exchanges are trading the particular asset. After a mutual agreement has been reached, the buyer will transfer the agreed upon fiat amount (usually into an escrow account, with the broker’s commission accounted for). The seller will then release the agreed upon amount of crypto assets to the buyer before receiving their fiat.  Trading OTC via a chat room like works in much the same way as trading via a broker, the main difference is that the buyer or seller is solely responsible for finding the counterparty and negotiating the terms of the transaction. 

Bitcoin ATMs 

For those who are new to cryptocurrencies, Yes, you can buy or sell Bitcoin via dedicated BTC ATMs. According to, as of November this year, there are 3 930 operational Bitcoin ATMs worldwide. The natural first step here is locating an ATM near you and then getting all the necessary information like, what are the limits? What are the fees? Is it buy only, sell only or both?  Once this is sorted, using the ATM is much like using any other ATM. Though there are many different companies that make BTC ATMs, the process is as easy as approaching the ATM, press start/buy/sell and then following the instructions. Though some ATMs will require a phone number, one noteworthy aspect of using this route is that it is anonymous. There is no AML or KYC involved. However, this privacy comes at a cost to the user, BTC ATMs may charge a transaction fee as high as 10%.  

Why go the OTC route?

OTC is attractive to high volume buyers and sellers because it provides a shield for their investment in a way that a regular exchange would not be able to.  The first of these is a way to circumvent low trading limits that. More than a handful, if not all traditional exchanges set limits on the amount that one can trade and withdraw during a period of 24 hours. In many instances, these limits may differ based on how long the user has been trading, user account verification, and even the withdrawal method.  Another protection offered by OTC is in the pricing. If one is to make a substantial trade over traditional exchange, the price of that particular asset could shift in such a way that the trade results in a loss for the trader. This is referred to as slippage and is a result of insufficient liquidity due to the infantile state of cryptocurrency.  Sounds great right? As is the case with any form of investing, there is an element of risk involved, more especially in crypto.  

Which mistakes to avoid when going OTC.

  • Trading a slow market OTC. This is not good because a slow market means less trading activity. The broker will have to work harder sifting through the order books resulting in a less favorable rate for you.
  • On the flipside, OTC trading a very volatile market could prove to be just as treacherous. Though a volatile market theoretically means more activity, brokers charge a risk premium as part of their quote. Higher levels of volatility means more risk, more risk means higher risk premiums are charged.
  • When buying or selling a significant amount of crypto, try not to compete it in one chunky trade. The rate you will get for selling or purchasing a smaller amount in separate trades will be better than what you would get for one massive trade. This also helps mitigate the risk of a large trade influencing the price negatively, and of course the higher risk premiums.
  Over the past year, OTC related cryptocurrency trading through large firms like the Goldman Sachs backed Circle and Genesis Global Trading, has seen incredible growth in the year. Circle is reported to have handled up to $ 4 billion monthly in OTC trades, with Genesis reporting a tenfold increase in daily trade volumes going up to anywhere between $75 million and $80 million.

Final Words

Realistically, such a crypto market, at its pinnacle is only available and truly useful to a select few. For everyone else working their way up, Binance and other such crypto exchanges are available.


  • Charla Schultz January 2019 - Reply

    Even with BitCoin hitting near the bottom recently, I am surprised to see that many ATM’s throughout the globe. we’ll see how that changes through out his yer.

  • Stephanie Pierce January 2019 - Reply

    So much has changed since November. Even the cryptocurrencies that were trading at the top a few months ago have taken a few lumps in the meantime.

  • Cleo Booher January 2019 - Reply

    There is a lot to be said about how the cryptocurrencies are trading today, compared to 5 years ago. There is more adaptation as well as consumer buy-in so it only makes sense to me that they are doing well.

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