Posted 11 months ago | by Catoshi Nakamoto
What do Pepto Bismol, Herpex, and Crypto all have in common? That might sound like the start of a seriously bad joke, but in fact, these are all things we can get OTC, or over the counter. Hold onto your horses though. Trading crypto OTC is nothing like strolling into your nearest CVS and asking for a bag of your favorite meme coin to go with that Sudafed. So what is over-the-counter trading? How is it different from using a centralized or decentralized exchange? And why might you consider trading over the counter in future?
Let’s get it.
Welcome to BitBoy Crypto! The home of the BitSquad and the largest crypto community in all the Interwebs. My name is Ben. Everyday on this channel, I show you how to make money in crypto. If you like money and crypto, then make sure to hit that subscribe button. In this button we go over OTC Desks and how they empower you on your financial journey.
When we buy crypto on our favorite exchange, we’re most likely purchasing from an individual. Someone trying to sell their assets at the price you’re willing to pay. The exchange is effectively the marketplace. The order book represents the goods on display. So when you place a market or limit order, you’re not buying or selling your crypto to the exchange itself, but placing an order in the book to be fulfilled – either instantly or at a later date.
Now that’s fine if you’re looking to buy or sell a few hundred dollars worth of your favorite crypto asset. Or even a few thousand. But what if we’re talking a few hundred thousand. A million. Tens of millions? Exchanges are great for everyday use and active trading. But there’s always a chance your sale or purchase won’t be fulfilled. You could see limit orders missed due to rapid fluctuations in price. Get hit with slippage, which is the potential discrepancy between your order price and the price of purchase. Or maybe there just isn’t enough depth or liquidity on the exchange. For all these reasons and more, OTC can be the ideal solution.
Over the Counter trading eliminates these risks entirely. Because instead of waiting for your order to be filled by the first bidder, you’ll have the support of a specialized crypto broker, yes an actual human being that you can actually speak to, whose job it is to match buyer and seller, and to ensure the trade is processed in the smoothest possible fashion. It’s the difference between staying in a crummy motel and a 5-star luxury resort. Between taking the greyhound and flying business class. Except when it comes to using and exchange or going OTC, they both cost roughly the same in fees.
The first thing to understand is that OTC trading is by no means limited to crypto. In regular financial markets, even the largest exchanges such as the NASDAQ and NYSE represent only a fraction of the total volume. In fact, they’re just the tip of a humungous iceberg. Most of which is under the surface. In other words, whale territory. Bonds, debt securities, and other complicated ﬁnancial gadgets like derivatives, are exclusively traded OTC. Derivatives have a total market value of over a quadrillion dollars. Want to know what a quadrillion dollars looks like? There you go. Equity is also traded OTC at immense scale, which includes stocks that don’t meet the requirements to be ‘listed’, i.e on the exchanges.
As for crypto, the OTC market is also way bigger than you might think. Since orders aren’t placed on the open exchange, official figures are all but impossible to come by. But according to an industry insider at Circle, one of the very first firms providing dedicated over-the-counter crypto services, OTC trading desks could now be handling anywhere from 2 to 3 times the daily volume seen on all exchanges combined. This anecdotal evidence actually makes a lot of sense. Yes, the market cap of crypto is well in excess of a trillion dollars, but nonetheless, large, whale-sized orders are placed on the books can rapidly affect the market. Exchanges don’t like this. Markets don’t like this. And it’s not exactly ideal for the individual or institutional seller either. I mean, good luck trying to offload a serious amount of a micro-cap gem on the open exchange. You’re basically shooting yourself in the foot by artificially dumping the price of your own sale. That’s essentially why OTC in crypto exists. To allow large sums to be moved around without moving the market. And as anyone who has tried to sell a reasonably large chunk of crypto in one go, you often need to break it up into a series of smaller orders in order to be sure they are filled. Going OTC clears up the need for dividing your sale up, allowing you to liquidate your crypto in one fell swoop, and with all the quality assurances you could want.
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Now you’d be forgiven for thinking this means only the whales can benefit from OTC trading desks. But you’d be wrong. I have several friends who have used them on many occasions when they needed to turn a decent amount of Crypto into Fiat. Sure, plenty of the Whale Only OTC desks wouldn’t be interested in the kind of non-Whale money, but there are smaller, nicer, boutique companies such as Caleb and Brown, who I personally use because they offer an incredible service for regular people looking to reap all the benefits of OTC. Caleb and Brown; you can check out their website by clicking the link above, can help facilitate trades from as low as only $2000 dollars. That’s by no means pocket change, but it’s nothing too crazy either. And whether it’s 2000, 20,000 or 200,000, there’s a lot to be said for working with dedicated professionals.
People that are actually on your side. Who you can reach by phone 16 hours a day like at Caleb and Brown to ensure your peace of mind. I mean, have you ever tried getting in touch with customer services on a regular exchange? Let alone ever succeeded? When you really want that extra reassurance that your sale or purchase will be smooth, successful, and deliver the best possible outcome, I seriously recommend you consider using an OTC trading desk because here is the thing. You are a whale. You’ll need the move your crypto around once you see profits. If you want to buy a house with your crypto gains are you really going to trust Coinbase to sell it and move it to your bank with ZERO issues? Banks freak out when they get anything from a crypto exchange larger than $10,000. But an OTC Trading Desk transaction is normal to them and fits into their spreadsheets nicely. Trading Desks like Caleb & Brown have personal relationships with these banks and can vouch for you and your credibility to the bank. Even in this modern world that is obsessed with signatures, risk-reduction, and 2-factor verification, nothing has replaced the gravitas of a person-to-person recommendation. It’s time you start acting like the whale you are. Get comfortable with OTC trading and transacting. You’ll be using it sooner than you think.
That’s all I got. Be blessed. Bitboy Out.