What is OTC (over-the-counter)?

OTC (over-the-counter) services in the context of crypto exchanges refer to a service that allows traders to buy or sell cryptocurrencies outside of the regular exchange order book. This means that OTC trades are executed privately between two parties, rather than being displayed publicly on the exchange.

OTC trading can be useful for traders who want to execute large orders without affecting the market price of the asset they are trading. This is because large orders on the regular order book can cause significant price movements, known as slippage, which can be unfavorable for the trader.

OTC services typically involve a broker or a team of brokers who act as intermediaries between the buyer and the seller, facilitating the transaction and ensuring that it is executed smoothly. The broker may also provide additional services, such as market analysis and price insights, to help traders make informed trading decisions.

Some crypto exchanges offer OTC services as an additional feature to their regular exchange platform, while others specialize exclusively in OTC trading.

OTC (over-the-counter) trading can be useful for several reasons, depending on the specific needs and goals of the trader. Here are some scenarios where OTC trading may be beneficial:

  1. Large trades: If you need to execute a large trade that is bigger than the liquidity available on the regular exchange order book, OTC trading can be a good option. OTC desks can facilitate large trades without causing significant price movements in the market, which can help you get a better price for your trade.
  2. Privacy: If you want to keep your trading activity private, OTC trading can be a good option. OTC desks typically offer a higher degree of privacy and confidentiality than regular exchanges, as trades are executed directly between the buyer and the seller.
  3. Lower fees: OTC trading may offer lower fees than regular exchanges, especially for large trades. This is because OTC desks often charge a flat fee or a lower percentage fee than regular exchanges, which may charge higher fees for large trades.
  4. Customized terms: OTC trading allows traders to negotiate customized terms for their trades, such as the price, quantity, and settlement date. This can be useful for traders who have specific requirements or preferences for their trades.

Overall, OTC trading can be a useful tool for traders who need to execute large trades, value privacy and confidentiality, or want to negotiate customized terms for their trades. However, OTC trading may not be suitable for all traders, and it's important to understand the risks and benefits of OTC trading before deciding to use it.

The article does not constitute financial advice.

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