How OTC Trading Works

Over-the-Counter, which is what OTC stands for, means “bypassing the counter.” This term refers to trading that goes on between clients and market makers without going through a stock exchange. In this case, the seller and the buyer deal with each other directly, usually with the help of a third party. OTC trading has been an important part of the traditional financial market for a long time, but in 2018, it is being used a lot in the cryptocurrency market.

How is Trading OTC Different from Trading Stocks?

In order to make a big trade on the stock exchange, you usually have to make a lot of small trades, and the rate for each trade may be different. At that time, the number of transfers needed and the spread of rates are both based on how liquid the market is and how volatile it is. Price changes are common in the cryptocurrency market, and they can make trading costs go up by a lot and hurt people who are in the market.

With over-the-counter (OTC) trading, clients can only make one large trade at a time. This makes the process more efficient and gets rid of the hassle of cross-exchange execution. In addition, the transaction is not written down in the site’s order book and is not shown to the public. This gives you a higher level of privacy.

What does trading over-the-counter have to do with selling tokens?

A big part of the money for cryptocurrencies came from token campaigns that started in 2017 and early 2018. Element Group, for example, has helped its clients raise more than $500 million. The OTC trading service offered by The Element Group gives its clients professional and innovative risk management services as well as ways to deal with liquidity and capital. In the phase after an ICO, it’s important for a company to actively manage the funds it has raised, and an OTC trading service can help with smart, customized solutions.

What does regulation mean for over-the-counter (OTC) trading?

As regulations, security alerts, and other tests are put on cryptocurrencies, they will be better able to compete with traditional investments. Due to the rise in demand from institutions, there needs to be deeper and more stable liquidity. Most of the time, cryptocurrency exchanges can’t meet these liquidity requirements, which helps the OTC trading market grow even more.

How to Choose an Over-the-Counter (OTC) Trader?

OTC firms offer answers to problems with liquidity, pricing, and information. Focusing on a single price or solution and working one-on-one with each customer creates a customer-centered environment that lets the service grow in new ways, such as escrow, lending, and syndication.

The best over-the-counter (OTC) providers adapt to new and uncertain markets with a healthy mix of confidence and humility so they can always offer their customers competitive services and liquidity.

When comparing providers, one of the most important things to look at is how well they can trade in high-growth markets with high volatility, low liquidity, and strong algorithmic trading skills.

Why do people choose over-the-counter (OTC) trading?

Traditional exchanges may lose business to OTC for a number of reasons, such as price stability, speed of execution, security, and privacy.

But long-term investors who don’t want to deal with KYC can trade stocks over-the-counter. You buy cryptocurrency for a long time, so 10%–15% commissions won’t matter to you after a while. And no documents.

But not only small investors who want to stay anonymous are interested in OTC. Big investors, or “whales,” are also interested, and here’s why. Even though the volume of trading on crypto-exchanges is small, it is a fact that when big companies buy crypto, quotes will change.

On exchanges, this is always how it works: if a big buy order is made all at once, the price goes up in the direction of the trade. This is not good for whales because they want to buy things for less money. Each time you buy a bigger amount, the price will go up, and the next time you buy the company, you’ll have to pay more.