What is OTC in Crypto? What is Over-The-Counter Used For?

What is an in crypto? OTC desks (short for "over-the-counter") have been around in traditional finance for a long time, dealing with stocks, bonds, and other assets. They started because sometimes big investors (called whales) or institutions want to make large trades without affecting the market prices on public exchanges.

Why whales can affect prices: Supply and demand

A whale selling a massive amount of Bitcoin can flood the market with more Bitcoin than people want to buy.

The number of people wanting to buy Bitcoin might even decrease if other investors get spooked by the whale's actions.

If there's suddenly a lot more Bitcoin available than people want to buy, the price has to drop to attract enough buyers to pick it up again. The price of Bitcoin, like any asset, is influenced by supply and demand.

Market sentiment and liquidity

So why use an OTC desks can provide a private, discreet way to handle these large trades without causing a stir.

OTC desks are designed to avoid these problems. They act as a private marketplace where large trades can happen directly between two parties, without the trade being publicly visible on an exchange. In this private sale, whales can act without spooking the market.

OTC desk at CoinJar

CoinJar offers an OTC desk for people who want to trade large amounts of Bitcoin, Ethereum, or other cryptocurrencies (over US$50,000 worth).

Using CoinJar's OTC desk can help mitigate risks or mistakes made when people are buying or selling large amounts of cryptocurrency. This is because CoinJar's OTC desk involves experienced professionals who are well versed in crypto trading.

Slippage

Large trades can often suffer from slippage, where the actual execution price is worse than the initially quoted price due to lack of liquidity.

Let's say you want to buy 100 Bitcoin on a regular cryptocurrency exchange. The current market price you see is $60,000 per Bitcoin. You place an order to buy at the best available price.

If there aren't enough sellers willing to sell their Bitcoin at $60,000 to fulfill your entire order, the exchange will start buying from sellers at slightly higher prices to complete your purchase.

As a result, you might end up paying an average price of $60,100 per Bitcoin instead of the initial $60,000 you saw, due to this price increase as your order gets filled. This difference is the slippage.

How OTC desks minimise slippage

Now, imagine you go to CoinJar's OTC desk with the same intention of buying 100 Bitcoin.

have access to a network of large buyers and sellers, creating a deeper pool of liquidity. This means they are more likely to find sellers willing to sell you 100 Bitcoin at a price close to the initially quoted price.

Once you agree on a price with CoinJar's OTC desk, that price is locked in. Even if the market price moves while they're executing your order, you'll still pay the agreed-upon price.

Because of the deeper liquidity and price guarantee, your large purchase is less likely to significantly impact the market price of Bitcoin.

Why use the CoinJar OTC desk?

Liquidity: Access to large amounts of crypto quickly. Personalised service: You get a dedicated expert to guide you through the process. Trading fees: You can negotiate trading fees directly, potentially getting a better deal.

Reduced market impact: Your big trades won't cause sudden price swings on public exchanges.

How it works

You contact CoinJar's and tell them what you want to buy or sell.

They give you a quote.

If you agree, they execute the trade for you.

You receive your crypto or cash, depending on the trade.

Who uses OTC desks

Institutional investors: Big companies or funds that trade large amounts of crypto. High-net-worth individuals: People with a lot of money to invest.

Businesses: Companies that want to use crypto for payments or investments. If you're just starting with crypto and only trading small amounts, the CoinJar app or the CoinJar exchange is fine. But if you're dealing with big sums and want a more personalised, discreet experience, an OTC desk could be a good option.

Conclusion: Why use an OTC desk?

CoinJar's OTC desk is like a VIP service for crypto trading. It's for those who want to make big moves without making a big scene. It's all about privacy, liquidity, and personalised attention.

CoinJar's OTC desk is for people wanting to trade large volumes of digital assets. By sidestepping the limitations of traditional exchanges, it offers a gateway to the OTC market's liquidity and personalised service that you don't get using the usual crypto exchange services.