Over-the-counter trading simply refers to trading not done through a lit pool such as public exchanges. Most OTC services operate under a dealership model, also known as an OTC desk. A dealer in an OTC desk has their own inventory of crypto assets which they use to fulfill trade orders. The other less common model is called an agency model. Under an agency model, the dealer will act as a representative between buyer and seller to reach an agreement and execute a trade.
Why trade OTC?
The main reason why buyers and sellers trade cryptocurrency over-the-counter is due to the a better average price when dealing with large quantities. For example, if an individual buys or sells a large volume order on a public exchange, the order will cause the price to fluctuate. The exchange will initially match the order with market prices but as availability becomes an issue, the exchange will fulfil the order with less than ideal prices. This can cause the average price of the fulfilled order to be much different from the market price. In an OTC trade, the dealer quotes a fixed price that will typically save a significant amount of money and time.
OTC Trading Drawbacks
One of the main drawbacks of OTC trading is the lack of transparency. Despite the large volume of OTC trading, OTC dealers do not reveal information about their process, trading volume, or other information. It is important to do your due diligence when using an OTC trader and ensure they follow the best industry practices and regulations and whether they have the infrastructure to fulfill your order and wire you your funds.
Bitbuy’s OTC Trading
Bitbuy is one of Canada’s largest cryptocurrency currency exchange. They provide both OTC trading and trading through exchanges. They are a registered MSB by FINTRAC, transparent with fees, follow the best industry practices with security including 2FA, and have a customer support team that is available by chat and phone.
A deeper look into Bitbuy’s OTC trading shows the following:
Bitbuy’s popularity, transparency, and low fees make them a trustworthy dealer for both OTC trading and public exchange trading.
Disclaimer: This is a paid post and should not be considered as news/advice.