Cryptocurrency exchanges provide platforms for buying and selling cryptocurrencies with various ways of trading. One of the ways is over-the-counter (OTC) trading.
You might not have heard of this form of trading until now, but no worries, because this article explains it in detail so you know what OTC trading is and how it works.
What is OTC Crypto Trading?
Everyone uses an exchange to buy and sell crypto assets. However, some crypto trades can be done without going to a traditional exchange. Any such trading is referred to as OTC trading and they are available in the form of standalone trading desks or on exchanges such as Binance.
Another way to do OTC trading is through peer-to-peer (P2P) trading platforms like LocalBitcoins, Paxful and the rest.
Basically, they allow you to buy or sell a crypto asset for fiat money without settling the transaction on an exchange, as is the case with spot trading. So if you are wondering how to buy crypto through P2P trading, here is how to buy bitcoin using Binance P2P.
How does OTC Crypto Trading work?
OTC trading platforms or desks allow easy buying and selling of cryptocurrencies directly between a seller and a buyer. This process is usually very quick and does not involve a credit card. Instead, funds are transferred directly from a bank account to the seller.
How does it differ from other forms of trading?
The main difference between OTC and other forms of crypto trading is that it involves direct trading of fiat and crypto in large volumes between seller and buyer.
Other forms of trading, such as spot trading, are between a trader and an exchange and involve one and another cryptocurrency, with strict limits on trading volume.
Who Should Use OTC Crypto Trading?
OTC trading is particularly suitable for traders who carry out large transactions. Crypto exchanges that operate OTC trading desks do so to keep such large trades off-exchange, as there may not be sufficient liquidity to complete the trades.
Those using the trading desk include hedge funds, private wealth managers and high net worth individuals who want to convert large amounts of cash into cryptocurrencies seamlessly.
For those looking to trade small amounts directly without using an exchange, P2P marketplaces like LocalBitcoins provide a convenient alternative. In addition, Crypto exchanges such as Binance also offer a P2P marketplace, which small-scale traders can use.
Why Use OTC Crypto Trading?
There are many advantages to using OTC trading, but we will consider the top three.
First, OTC trading offers better asset prices. Since OTC trading is mainly for large trading volumes, placing such trades on an exchange can cause a large distortion in the price of the asset, resulting in slippage. This can significantly affect the price at which you purchase the asset.
The result is that the trade ends up splitting into several small trades, which leads to increased costs per trade. OTC trading allows the execution of large trades at a single price and in one trade, making it both convenient and cost-effective.
Another reason to use OTC trading is that traditional exchanges usually limit trading volume per user per day. Such limits do not exist on OTC platforms, so you can place an order of any volume and it will be filled.
Orders on OTC platforms are also filled immediately, so it saves time. Placing a large volume order on a traditional exchange can not only be expensive as trades are broken up into several smaller trades, but it can also take longer to fill.
Is OTC Crypto Trading Worth Using?
If you want to trade large amounts of fiat money against cryptocurrency or large amounts of crypto against cash, yes, OTC trading is worth using. It is actually the best form of trading if this is your situation, as it saves you time and money and is far more convenient.
