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OTC – Over The Counter Trade. Before explaining about what is bitcoin OTC trading, I just want, you people to know what is OTC trade.
As the world has grown up digitally, Business people want to buy, sell and trade their goods via exchange portal. But the problem here is every exchange portal has some rules and norms, which includes not to trade a huge amount of goods in a single order. (i.e) there will be a limit, so you can’t do bulk trade at a time.
To overcome this inconvenience, trading industry was introduced a new medium called OTC Trade Market.
OTC Trade – Also known as off - Exchange Trade, which is done directly between two individuals outside of an exchange. The word over the counter refers the stocks that can be traded via central party or dealer. In general OTC Trading is used to trade financial elements like stocks, commodities, digital bonds, or derivatives. Over the counter trade will be fully carried out through a dealer network, with whom trader can buy or sell their assets directly without the supervision of any centralized Exchanges. Here the buyer or seller will have their brokers with whom they can negotiate prices for a single order and can do bulk trades.
The broker may be an individual, or network of brokers, or maybe a Firm.
Products which are traded through a stock exchange or forex exchange must match the quantity, quality, and other measurements defined by the exchange. But OTC marketplace will not have any of these limitations, (i.e) you can trade unusual amount of goods quantity, it will be preceded only after the agreement of two counterparties who involves in the bilateral trade.
There are two types of OTC venues.
1. An – Interdealer broker, - A firm that involves as an intermediary to match the buyer and seller of bilateral contracts.
2. Principal – OTC Trading company- A firms that act as a direct counterparty and manages the trading risks
According to Wikipedia
“ There were 16% of U.S stocks were traded through OTC marketplace,
and by April 2014 it gets increased to 40% “
So hope you got some interesting brief outline about OTC Trading, Let’s get into the Bitcoin OTC trading,
Bitcoin OTC Trading – Utilize the complete juice of General OTC Trade made on a stock exchange, (i.e) you can trade a huge number of bitcoin through a central party without the control any centralized bitcoin exchange. Here the counter-parties agree on the risk of losing, hacking, and every other risks and start proceed their trading.
The OTC market may be a central counterparty where it can match the buyer and seller through an approved broker.
It is a highly wanted cryptocurrency trading method without inflating and deflating the price of bitcoins and can maximize the trading power of an individual trader.
OTC trade can be done through several different ways.
1. Through brokers
2. Through chat rooms
3. Via ATM ( Bitcoin ATM’s)
1. Maximize the trading power of a single trader
2. Perfect choice for who wants to trade a huge amount (bulk trade) of dollars through bitcoins.
3. Centralized Exchanges will charge separate fees by splitting up the huge order, but whereas the OTC marketplace will charge one transaction fee and not by splitting up the order.
4. Bitcoin OTC Trading Avoids “Slippage”
Slippage: A centralized bitcoin exchange can’t allow purchasing a bitcoin worth of several million dollars in one go. So trader will end up with getting the fraction of bitcoin they aimed to buy, and they will need to spend more money than what they expected. Traders often call this a slippage”.
5. Bitcoin OTC Trading Reduced the trading time.
Based on the liquidity it will take too much time to complete the order in traditional exchange, but OTC Trading will quickly process the large volume trading.
When there is pro’s there will be con’s any concept. Bitcoin OTC Trading is not an exception
Even though OTC trading is great, it has some demerits compared to traditional exchange Platform,
Some of the demerits are,
· OTC trading can’t be automated by using an API like exchange platform
· Might have higher trading fees than a traditional exchange
· Only for large-scale traders not for a small volume traders
· Depending on brokers for trading might have a higher level of risk than traditional
Bitdeal is familiar for providing a best bitcoin exchange script, for business people to start their own bitcoin exchange. Just like Centralized bitcoin exchanges, now OTC marketplaces are also getting a huge demand because it neglects a lot of restrictions filled in traditional exchanges.
So based on the needs people who look to start a secured OTC Trading network, or marketplace, bitdeal can benefit you with proper IT support. We can make your own OTC marketplace where you can connect a lot of buyer and seller to proceed with their bilateral contracts.
Start your Own Bitcoin OTC Trading platform
Hi this is Sam, Working as Technology advisor and blogger at bitdeal. Having 4+ years of deep understanding and experience in cryptocurrency trading industry. I keep on hunting the new trends and technologies that are related to crypto's as well as blockchain Industry. Stay tuned with me at bitdeal, to get interesting updates regarding bitcoin, cryptocurrencies and other emerging blockchain technologies
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