OTC: FIAT TO CRYPTO

Consulting Fees: 15,000.00 EUR 
Transaction fees: 1% 

Crypto OTC desks play an important role in facilitating large cryptocurrency purchases and sales.

What Are Crypto OTC Desks?

Over-the-counter (OTC) trading desks facilitate trading between two parties without revealing information about the trade to the public via an exchange orderbook or otherwise.

The OTC desk acts as a matchmaker enabling high-volume transactions between buyers and sellers. During an OTC trade, the two parties agree on a purchase price before they can complete the transaction. The trades can be crypto-to-crypto or fiat-to-crypto.

OTC desks differ from traditional exchanges in terms of transaction transparency. A crypto exchange like Kraken or Binance acts as an intermediary between buyers and sellers. Transactions are executed via an orderbook for everyone to see.

Conversely, crypto OTC trading is relatively opaque since no one beyond the transacting parties is aware of the price and volume of assets being traded. Moreover, OTC trades are typically insulated from wider market fluctuations that occur on exchanges.

Why Are OTC Desks Important in Crypto?

Crypto OTC desks exist to enable large investors, such as early adopters, high-net-worth individuals, and institutional investors, to buy and sell large amounts of cryptocurrencies without alerting the market about their intention or transaction.

If you try to buy 1,000 BTC on a regular crypto exchange, you will run into several problems. A key challenge is that the chances of finding someone selling that amount at any given time on a single exchange are slim.

You will have to opt to spread the purchases across several sellers. The problem that arises is you may end up making some of the purchases at a significantly higher price. Of course, you may be able to avoid this altogether and spread the purchase across several exchanges, but this will be time-consuming and costly. Moreover, you will show the entire market that you are a large buyer or seller, which will most likely lead to a worse execution price.

Crypto OTC desks remove the uncertainty and risk for investors looking to buy or sell large volumes of crypto.

Pros and Cons of Using OTC Desks in Crypto

Here are some of the benefits and challenges of using crypto OTC desks.

Pros

• Transactional privacy – Crypto OTC trading allows you to buy directly from the seller and vice versa through an OTC broker, preventing the broader market from knowing that you are about to make a large transaction that could move the price of the cryptocurrency you are trading.
  
  Mitigate price volatility – Purchasing large amounts of crypto from a regular exchange may take time for the transaction to be processed and exposes a trader to slippage. Slippage is where the asset price moves away from the intended purchase price due to market fluctuations. OTC trades enable the private purchase of assets at a stipulated price.
  Price Negotiation – Trading on a regular crypto exchange leaves no room for negotiation, but a trader can make an order, reject an offer, or counter an OTC desk.

Cons

• Counterparty default risk – Trading with an over-the-counter trading desk opens you up to counterparty risk as you are only dealing with one counterparty that could renege on a trade or collapse before your transaction is completed.