When it comes to the facilitation of large sums of cryptocurrency purchases and sales, crypto OTC desks play one of the most crucial roles. If you want to learn more about crypto OTC desks then you have come to the right place. Today we are going to discuss what are crypto OTC desks and how they function.
What are Crypto OTC Desks?
Okay, let’s start from the very basics. OTC trading desks, also referred to as over-the-counter, trading desks, are responsible for allowing a trade between two parties while ensuring no information about the trade is revealed to the public through an exchange orderbook or something else.
When high-volume transactions are being made between buyers and sellers, it is enabled by the OTC desks acting as a matchmaker. To complete the transaction, both parties need to settle on a purchase price ahead of the transaction. There is an option for the trade to either be from fiat to crypto or just directly from crypto to crypto.
The transparency of a transaction is one of the main differences between OTC desks and traditional desks. Crypto exchanges such as Binance or Kraken are responsible for being the middle-man between buyers and sellers. These transactions are carried out through an orderbook that is out for everyone to see.
On the other hand, trading with OTC is comparatively more opaque. This is because the volume and the price of the assets that are being traded are known by no one besides the buyer and the seller. To add on to that, compared to the fluctuations that occur in the wider market due to the exchanges, OTC trades are generally much more insulated. If you are looking for the best OTC crypto exchange then you can rely on CoinCashy.
How Do These Crypto OTC Desks Function?
Is the crypto OTC trading platform legit? In order to understand these, we must first classify the two different types of crypto OTC desks that are being used. They are agency and principal.
Agency Desks
Since their own money is not being put up for the transactions, agency desks do not take into account the market risk. Instead, they are responsible for brokering a deal on behalf of the actual buyer by acting as a middleman or intermediary. An additional brokerage fee is charged for this service.
Principal Desk
Principal desks take on the risk of the buyer by utilizing their own funds in order to acquire the asset which the buyer requires. For example, if a significant purchase needs to be made by some large-scale Bitcoin investor, they would consult with the OTC desk to get a price quotation. The desk would then provide results that reflect the current market conditions.
It is completely up to the buyer whether or not they want to accept the given offer or make another reasonable counter. If the buyer decides to go with the proposed price, the OTC desk is now responsible for sourcing the Bitcoin and delivering it to the buyer based on the legal contract.
Final Words
Hope you got the answer to the question what are crypto OTC desks. Crypto OTC desks are responsible for making big transactions more opaque and ensuring that it is not out for the whole public to see. They can make transactions feel more private and safe. This is why it is important to know about OTC desks if you are trying to better understand the crypto world. We hope this was helpful and provided you with the necessary information!