Cryptocurrency is bought and sold in different ways.
Trades are commonly made on public exchanges like BTC Markets. Others are settled ‘over-the-counter’ (OTC).
OTC refers to trading privately between two parties. Trades are made outside of public exchanges. OTC is an effective way to save money on large trades.
Here’s how it works.
What is OTC and how does it differ from exchange trading?
OTC trades are negotiated deals made between two private parties. Stocks, currencies, and other assets, like cryptocurrency, can be bought and sold OTC.
This differs from exchange trading which occurs in marketplaces hosted by exchanges. For example, the Australian Stock Exchange (ASX) hosts stock markets. Similarly, BTC Markets hosts trades between digital assets, including cryptocurrencies, and Australian dollars.
These markets consist of digital order books. Buy and sell orders go ‘onto the books’ when created. Orders are taken ‘off the books’ when matched with other trades.
OTC contrasts this. There is no order book. Prices are privately negotiated and agreed upon by two parties.
One benefit of OTC is fixed rates. This reduces the risk of exposure to price slippage. Slippage refers to prices changing while orders are being placed. This results in entering or exiting a trade at an undesired price.
Slippage commonly occurs in volatile markets.
How does OTC save money on large cryptocurrency trades?
To find out, read the full article on Stockhead.