OTC (Over the Counter)
What is Over-the-Counter (OTC) in crypto?
Over-the-Counter (OTC) refers to direct trading of cryptocurrencies between two parties, without using a public exchange. OTC deals are typically handled by specialized brokers, desks, or institutional platforms, and are used for large-volume transactions that could otherwise move the market price if executed on open exchanges.
OTC trading allows buyers and sellers to agree on terms privately, offering more flexibility, privacy, and often better prices for large trades.
How does OTC work in crypto?
Buyer and seller agree on a price and amount.
An OTC desk or broker facilitates the transaction, handling custody, settlement, and compliance.
Funds and assets are exchanged directly, outside of public order books.
KYC/AML procedures are applied to comply with regulations.
Why is OTC important in crypto?
Avoids slippage – Large trades on exchanges can cause price drops; OTC prevents this.
More privacy – Trades are not visible on public exchanges, protecting sensitive information.
Better for institutional and high-net-worth investors – Facilitates trades in millions of dollars.
Flexible settlement options – Custom agreements on timing and terms.
Access to large liquidity – OTC desks can aggregate liquidity from multiple sources.
When is OTC used in crypto?
Use Case | Description |
|---|---|
Large Bitcoin or Ethereum purchase | Buying or selling millions in crypto without moving the market. |
Institutional entry | Hedge funds, companies buying crypto directly. |
Private token sales | Early-stage investments, large investor rounds. |
Avoiding exchange limits | Bypassing daily withdrawal or trading limits. |
OTC for stablecoins | Acquiring USDC, USDT in bulk for trading or treasury. |
Pros and Cons of OTC in crypto
Pros | Cons |
|---|---|
No slippage on large orders | Requires trusted counterparty or broker |
Private, discreet transactions | Less transparent pricing compared to exchanges |
Access to deeper liquidity | Not suitable for small retail transactions |
Flexible settlement and pricing | Potential delays in settlement |
Difference between OTC and exchange trading
Aspect | OTC Trading | Exchange Trading |
|---|---|---|
Visibility | Private, not on public order books | Public, transparent order books |
Order size | Typically large (hundreds of thousands to millions) | From small retail trades to large orders |
Price impact | No impact on market price | Can move market price on low liquidity pairs |
Speed | Negotiated, may take longer | Instant or near-instant based on market depth |
Participants | Institutions, whales, accredited investors | Retail and institutional investors |
Examples of OTC platforms in crypto
Platform | Services |
|---|---|
Coinbase Prime | Institutional OTC desk and custody |
Binance OTC | Direct crypto trades for large clients |
Kraken OTC | Deep liquidity for Bitcoin and other assets |
Genesis Trading | Leading institutional crypto OTC platform |
Circle OTC | OTC services for stablecoins and crypto pairs |
Conclusion
Over-the-Counter (OTC) trading is essential for large-volume cryptocurrency transactions, offering privacy, flexibility, and access to deep liquidity without impacting public markets. OTC is a key tool for institutions, high-net-worth individuals, and funds, enabling them to enter or exit positions efficiently. Understanding how OTC works helps investors navigate large trades safely and strategically.
