How Does Crypto OTC Trading Work?

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How Does Crypto OTC Trading Work?

Cryptocurrency exchanges provide facilities for buying and selling cryptocurrencies in a variety of methods. Over-the-counter (OTC) trading is one method.

You may not have heard of this kind of trading before, but don’t worry since this article will explain what it is and how it works in detail.

What Is OTC Crypto Trading?

To buy and sell crypto assets, everyone utilizes an exchange. However, certain crypto deals may be completed without using a regular exchange. OTC trading refers to any such deal, and it is offered via stand-alone trading desks or exchanges such as Binance.

Another option for OTC trading is to use peer-to-peer (P2P) trading systems such as LocalBitcoins, Paxful, and others.

They essentially enable you to purchase or sell a crypto asset for fiat money without having to settle the transaction on an exchange, as with spot trading. So, if you’re wondering how to purchase crypto via peer-to-peer trading, here’s how to buy bitcoin using Binance P2P.

How Does OTC Crypto Trading Work?

OTC trading platforms or desks facilitate the direct purchase and sale of cryptocurrencies between a seller and a buyer. This procedure is typically fairly quick and does not need the use of credit cards. Instead, payments are transmitted straight from the seller’s bank account.

How Does It Differ From Other Forms of Trading?

The primary distinction between OTC and other kinds of crypto trading is that it includes large-volume direct trading of fiat and crypto between seller and buyer.

Other types of trading, such as spot trading, take place between a trader and an exchange and involve one cryptocurrency vs another, with stringent transaction volume limitations.

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Who Should Use OTC Crypto Trading?

OTC trading is very beneficial for traders that conduct large-scale transactions. OTC trading desks are used by cryptocurrency exchanges to keep big deals off the exchange since there may not be enough liquidity to execute the trades.

Hedge funds, private wealth managers, and high-net-worth individuals utilize the trading desk to easily convert significant sums of cash into cryptocurrency.

P2P marketplaces such as LocalBitcoins offer a simple solution for people who want to trade modest quantities directly without utilizing an exchange. Furthermore, cryptocurrency exchanges such as Binance provide a P2P marketplace for small-scale merchants to utilize.

Why Use OTC Crypto Trading?

There are several advantages to adopting OTC trading, but we will focus on the top three.

First, OTC trading offers better asset prices. As OTC trading is mainly for large trade volumes, placing such trades on an exchange can cause a major distortion in the price of the asset, resulting in slippage. This can significantly affect the price at which you buy the asset.

The result is that the trade ends up splitting into several small trades, leading to increased cost per trade. OTC trading allows the execution of large trades at a single price and in one trade, making it both convenient and cost-effective.

Another reason to use OTC trading is that traditional exchanges usually limit trade volume per user per day. Such limits do not exist on OTC platforms, so you can place an order of any volume, and it will get filled.

Orders on OTC platforms are also filled instantly, so it is time-saving. Placing a large volume order on a traditional exchange can not only be expensive as trades get broken into several smaller trades, but it can also take longer to fill.

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Is OTC Crypto Trading Worth Using?

If you wish to trade large volumes of fiat money for cryptocurrency or large amounts of crypto for cash, yes, OTC trading is worth using. Indeed, it is the best form of trading if this is your situation, as it saves you time and money and is far more convenient.

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