The term OTC is a big boon for institutional investors who involved in cryptocurrency investment. You may think what exactly the OTC trading is and how it can be traded. In this blog, we will tell you about what is OTC? How the OTC is processing? How to develop OTC desk platform?
What is OTC trading?
OTC trading is done directly between two parties. An OTC intermediate either activates the trade with liquidity or finds some persons who are willing to take the other end of the trade.
With the help of OTC broker, you get a price quoted to you up front and you don’t have to think about order books, liquidity, order book depth, markets moving, exchanges, BTC price change, trades failing and many other inconveniences of trading by yourself.
There are two main types of OTC venues:
1. An inter-dealer broker, a firm that acts as an intermediary to match a buyer and seller. An inter-dealer broker is a person who will do the advertisement for a fixed fee or charge to both the buyers and sellers for their matchmaking services.
2. A principal OTC trading company, a company that will act as the direct counterparty and takes on the end to end trading risk. Principal OTC trading company will work on the similar process as an inter-dealer broker. They can predict the value based on market demand and how well they can manage their risk.
For example, if you ask to buy or sell the huge amount of BTC, they will analyze available liquidity in the market and calculate their ability on how quickly they could do the transaction themselves. Also, they also add an additional profit (service fees) for their trading risk.
While this looks like the principle that, cryptocurrency OTC trading is really opaque. This is something different than the traditional bitcoin exchange. On a centralized exchange, you can see all the buy-and-sell orders in the order book. You can see who buy or sells your bitcoin with the transaction data. But, when you’re trading OTC, you don’t necessarily know what the market looks like or don’t know how OTC broker is charging. Bitcoin OTC trading provides anonymous data and price instability, but it’s not that this kind of trading is cheap.
How does an OTC trader make money?
They follow simple technique as we can call it Zero sum game. They buy the bitcoins at the low price and sell them at the high price. The network they have built with the financial investors makes their OTC trading often possible. This is helpful for institutional investors who are ready to buy cryptocurrency at large numbers. The OTC traders target this type of investors and rotate their wings towards the OTC trading as much as possible. Read this one to learn more about OTC market.
How to develop OTC desk exchange:
Our Team coinjoker has a valuable experience in this crypto space since 2014. We develop OTC desk platform with the deep liquidity, complete transparency, customization, and 24 hour client admin dashboard. The features we deliver in OTC desk development are
o The traders can enable lock in purchases instantly, without waiting for bank response time.
o Direct one to one communication from OTC desk for rapid support
o We can make the platform making the direct communication with brokers for transaction flexibility.
o Our experts can build OTC desk with Off-market chain transactions providing a cost-effective method to trade larger volumes without moving the market price.
o Access to any available cryptocurrency via one location.
Tell us about your project requirements and we can help you to develop OTC desk with multi functionality.