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Over-the-counter (OTC) desks facilitate the trading of securities that are unlisted on a formal exchange due to various reasons.
This can encompass many different asset classes, most notably cryptocurrencies.
Often times, due to economies of scale, smaller companies are unable to comply with the listing requirements of formal exchanges or reconcile large fees required by the big industry players.
In this scenario, OTC trading desks play a major role, enabling Peer-to-Peer (P2P) crypto trades through broker-dealers.
Why Do Some Investors Prefer OTC Desks?
OTC desks have gained popularity with the rise of crypto markets, namely miners or early crypto investors.
Conversely, there are plenty of investors, including high-profile individuals, who are willing to buy crypto without resorting to major exchanges.
Additionally, OTC desks are a particularly attractive option for traders who want to trade large amounts of cryptocurrency quickly and anonymously.
Most cryptocurrency exchanges require their users to provide a significant amount of data on their personal identities.
Exchanges can also have a difficult time with facilitating large cryptocurrency trades because of a lack of liquidity.
This runs the risk of a large trade can take days or even weeks to complete, which in any financial market is simply untenable.
The appeal of OTC desks has outpaced interest relative to traditional exchanges in the crypto space for these reasons.
Crypto OTC trading presently boasts larger daily volumes than major exchanges, per a recent report from the TABB Group.
By and large, most investors opting to buy or sell large amounts of cryptocurrency without the presence of excessive regulation, and possibly better terms trends towards OTC trading.