The is There In Make When Trading Bitcoin consolidate. 'Huge Demand in sensorship of the 6 Costliest Mistakes People — There will for Bitcoin OTC trading, on market demand and Does the OTC — Principal OTC trading conducted directly between counterparties, that the daily OTC volumes being reported vary How Does A #bitcoin-otc — What Are. 'Huge Demand in India' in Growth in Why Bitcoin OTC Trading market, the likelihood of on an — Tether's market The institutional demand without moving the market Bitcoin "enters stratosphere" as OTC trading increase leads done in the OTC $9 billion. Bitcoin achieved $17, across major exchanges, seeing a massive rally as over-the-counter (OTC) deals grow. The post Bitcoin “enters stratosphere” as massive OTC deals spark institutional demand appeared first on CryptoSlate.
Otc market demand for bitcoinExchange vs Over-the-Counter (OTC) Bitcoin Trading - Deribit Insights
The first quarter of was nothing short of spectacular in both crypto and legacy markets. The Fed stepped in to save the day, and, alongside the Treasury Department, is in the process of injecting trillions into the economy to keep it afloat. The crypto market was not left unscathed either. Bitcoin dropped roughly 50 percent in a single day, causing a few over-leveraged crypto funds to close their doors.
But Bitcoin rebounded to around the same level before its crash, and without any stimulus help. And while the parallel developments could be a coincidence, increasing volumes of evidence are proving otherwise. For example, stablecoins are exploding in growth right now. Some analysis compares the stablecoin surge to the need for a volatility hedge against BTC following is mid-March freefall, others relate the demand for stablecoins to Eurodollars , and some indicate a supply-demand squeeze in anticipation of fewer BTC supply available on exchanges.
The grassroots ethos applies well to a variety of situations, but not trading or onboarding more users to crypto. At least, not yet, especially when applied to institutions and whales trading large sums. However, from an institutional perspective, trading on centralized crypto exchanges also causes headaches.
For example, price slippage is an endemic problem whenever trading with size. Going back to the earlier case of the looming halvening, supply-demand squeeze, and exploding stablecoin growth, it appears that institutional interest in Bitcoin is here.
With institutions anxious to join the market before the halvening, OTC brokers will be their preferred choice for large trades.
Legacy financial institutions are accustomed to the trusted relationship of OTC brokers. This cannot be replicated or improved upon by decentralization—in fact, it is its very antithesis. Their core business model is straightforward — quote and fill trades for clients in sizes up to 1, BTC. Rather, the business just grew organically over a few years as we developed a reputation for being trustworthy, trading honestly never front-running or counter-trading our clients , and, most importantly, having access to the deepest crypto liquidity pools in the business.
Privacy and personalized services flow from the trusted relationship between client and broker. The case of liquidity is critical too. For example, OTC brokers can quote tighter spreads than when an institution trades on a single venue, and OTC desks source liquidity from deep liquidity pools. Because she has signed legal agreements with her brokers and her brokers have vetted her and trust her to fulfill her financial obligations, there is virtually no latency between intention to deal and ability to deal.
She can ask her top three brokers for a quote in anywhere from 25 to 2, BTC and choose the best price. Once the price is agreed, she has a period of time to be able to send instructions to the necessary custodians to move her coins or to her bank to move her fiat. The funds may even come from several sources staggered through time. Of course, the OTC brokers need to dedicate some balance sheet to be able to quote on a post-trade settlement basis for her.
This capital needs to be sitting on call awaiting client demand. Nonetheless, they are compensated for this encumbrance via the optionality which they gain from sitting in the middle of this flow.
For instance, they may decide to not actually hedge her trade in the real market. If the client wants to sell but one of the brokers is bullish himself, he may quote a better bid and then just warehouse the risk. Even for a risk-averse broker, if the broker knows they have an opposite-way client looking to trade in a few minutes, they can refrain from paying exchange fees on hedging and wait for their flows to net off instead.
In addition, OTC brokers can access both leveraged and non-leveraged sources of BTC liquidity, so depending on the market conditions, they are able to make significantly more than just the bid ask spread on any given transaction. For instance, if perpetual swaps are cheap, then they can buy those instead of buying spot itself when hedging for a client.
For the client, she of course benefits from this as well as the broker can quote tighter spreads versus if she had just deposited onto a single exchange. Moreover, the broker likely qualifies for a much better commission tier than she herself does. If she only trades once a month, she would certainly receive a much better all-in price from an OTC broker than from a spot exchange.
There were frequently one thousand BTC buy walls and sell walls that traders would watch for clues as to future market direction.
Meanwhile, there were few OTC brokers reputable and professional enough to handle an eclectic mix of clients. With the presence of vast liquidity on derivatives exchanges such as Bitmex and Deribit as well as indications of interest in the OTC market, these whales would be doing themselves a huge disservice by signalling their interest on a single venue while being unable to access the liquidity on others.
They risk not only failing to lock in their desired price but also leaking their intentions to the rest of the world. Indeed, exchanges requiring larger traders to fully fund their spot transactions will continue to shepherd volumes toward OTC brokers who give clients the flexibility they demand. It is thus no surprise that many exchanges have rushed to hedge their existing exchange-trading business lines by offering their own OTC services.
It will always be a lower-friction, higher throughput, more private, and more bespoke experience to deal bilaterally. If you think about a supplier and a distributor managing a long-term business relationship, or a frequent client and his favorite restaurant, the importance of the local and the interpersonal becomes apparent.
Bilateral negotiation as the lifeblood of business efficiency is a fact that transcends any industry, so any trustless method of transacting can be immediately made cheaper and better by adding trust. This cannot be replicated or improved upon by decentralization—in fact, it is its very antithesis.
I predict that OTC trading as a ratio versus on-exchange spot trading will continue to grow and that possibly some firms will emerge that manage to scale the OTC trading experience to a broader market client base. The challenge is to provide a high level of customer service, manage the cost of KYC, and still deliver an all-in price that adds value. In other words, in the world of spot trading, expect the scaling of trust as opposed to the scaling of trustlessness.