How Does Crypto OTC Trading Work?

Cryptocurrency exchanges provide platforms for buying and selling cryptocurrencies with different ways of trading. One of the ways is over-the-counter (OTC) trading.

You may not have heard of this form of trading before now, but no worries, because this article explains it in detail so that 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. Some crypto trades can be carried out without going to a traditional exchange, though. Any such trade is referred to as OTC trading, and they are available in the form of stand-alone trading desks or on exchanges such as Binance.

Another way to carry out 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’re 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 fast and does not involve credit cards. 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 cryptocurrency and another, with strict limits to the trade volume.

Who Should Use OTC Crypto Trading?

OTC trading is particularly suitable for traders who carry out large-scale transactions. Crypto exchanges that operate OTC trading desks do so to keep such large trades off the exchange, as there may not be sufficient liquidity to complete the trades.

Those who use the trading desk include hedge funds, private wealth managers, and high-net-worth individuals wishing to convert large amounts of cash into cryptocurrencies seamlessly.

For those who wish to trade small amounts directly without using an exchange, P2P marketplaces such as LocalBitcoins provide a convenient option. 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 benefits to using OTC trading, but we will consider the top three.

First, OTC trading offers better asset prices. As OTC trading is mainly for large trade volumes, placing such trades on an exchange can cause a major distortion in the price of the asset, resulting in slippage. This can significantly affect the price at which you buy the asset.

The result is that the trade ends up splitting into several small trades, leading to increased cost 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 trade 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 get filled.

Orders on OTC platforms are also filled instantly, so it is time-saving. Placing a large volume order on a traditional exchange can not only be expensive as trades get broken into several smaller trades, but it can also take longer to fill.

Is OTC Crypto Trading Worth Using?

If you wish to trade large volumes of fiat money for cryptocurrency or large amounts of crypto for cash, yes, OTC trading is worth using. Indeed, it is the best form of trading if this is your situation, as it saves you time and money and is far more convenient.

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