What is a Crypto OTC Trading Platform?

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Contributor, Benzinga
December 21, 2022

While most investors go through an exchange or brokerage to trade, you do not have to use these common and traditional channels. Instead, you can engage in over-the-counter (OTC) trading. But what is OTC trading, exactly? More importantly, what benefits does it provide investors? 

A crypto over-the-counter trading platform is one of the many tools that have been developed under efforts to decentralize the global financial system and lend greater sophistication to crypto trading.

Crypto OTC trading platforms allow you to swap assets with other investors with far less oversight from third-party entities. This platform may be a standalone trade desk or decentralized exchange. The primary purpose of this entity is to bring two parties together in order to facilitate an exchange. In some instances, the OTC trading platform may not even take direct custody of the assets.

While OTC platforms act as intermediaries, they often gather little to no personal identifying information. Additionally, exchanges and trade desks allow you to efficiently complete transactions while paying minimal fees. 

How Do Crypto OTC Trading Platforms Work?

OTC trading platforms connect you directly with another investor who's willing to take the other side of your trade – no traditional exchange is needed to mediate the trade or hold funds in escrow. You can swap crypto for crypto or transfer funds directly from your bank account to theirs. 

OTC crypto trading is primarily designed for parties that want to trade large volumes of cryptocurrency. However, virtually anyone can trade crypto OTC. 

How Does OTC Trading Differ from Other Forms of Crypto Trading?

The core difference between other crypto trading options and OTC trading is that the latter involves exchanging large volumes or values of assets directly between the parties. Other trading routes may have limitations that can delay the trade and see investors incur additional costs charged by an exchange acting as middle man.

Another key difference is that there are no trade volume limits with OTC trading, generally. This empowers investors to trade large volumes of a single cryptocurrency in a more cost-efficient way that may not otherwise be possible on a traditional exchange, where the necessary, high liquidity levels may be lacking.

Who is OTC Trading Best for?

OTC trading is key for traders who need to conduct large-scale deals. Crypto exchanges can offer OTC facilities via an in-house OTC trading desk. These desks are used exclusively for OTC transactions, so smaller retail investors often don’t reap the benefits.  

By using an OTC trading desk, exchanges can keep large deals off of the main platform. In turn, this helps the exchange maintain enough liquidity for retail investors, while simultaneously giving them the ability to accommodate large deals

OTC trade desks are primarily used by private wealth managers, high-net-worth individuals and hedge funds. However, other investors can engage in OTC crypto trading using peer-to-peer (P2P) marketplaces. Binance is perhaps the most well-known P2P marketplace, but a few others include Paxful, Gemini, and HODL. 

3 Advantages of Over-the-Counter Trading

OTC trading offers several distinct advantages over traditional alternatives, including:

1. Security

The federal government has taken steps to ramp up regulation of the cryptocurrency sector. This should come as no surprise, as countless individuals have fallen victim to cybercrime while attempting to engage in legitimate crypto deals.

While it is unclear what measures the government intends to take to curb cybercrime, you can take precautions to protect yourself. Engaging in OTC trading is one such step. 

OTC trading platforms offer more security and confidentiality than traditional exchanges. Transactions are more secure with fewer parties involved, and you only have to provide a minimal amount of identifying information. 

2. Direct Transactions

Third-party entities frequently put restrictions on cryptocurrency transactions, such as the quantity of coins you can trade in one transaction. Additionally, exchanges typically charge per-transaction fees; if you have to conduct multiple transactions as part of a complex trade to purchase the desired amount of crypto assets, those fees rack up.

By going the OTC route, you can engage in direct transactions without such restrictions or excessive fees. You can purchase as many crypto assets as you would like in a single trade. This means that you reduce the total amount of fees.

3. Liquidity

Traditional trading platforms are notorious for their low liquidity. In the crypto world, liquidity refers to the ease with which you can buy, sell or trade assets at a given price point. In an illiquid market, it is difficult to execute transactions, especially if a large volume of assets is involved. As a result, the final realized price can move negatively against you. 

OTC trading platforms are able to source high liquidity, making it more frictionless to trade cryptocurrency. When operating in a highly liquid market, it is easier to cash out your assets as well. This gives you the freedom to access the resources you need when required.

Should I Use a Crypto Over-the-Counter Trading Platform?

If you want to conduct large-volume crypto transactions, you should strongly consider using a crypto over-the-counter trading platform. Such a platform has high liquidity and superior security. These platforms also give you the ability to conduct trades directly with other investors. 

If you are engaging in lower-volume trading, you can still experience benefits from using an OTC platform. However, carefully vet the platform's legitimacy before you conduct a trade. While these platforms offer an exceptional amount of anonymity, many of them also offer few protections against fraud.

Your best option might be to use a crypto broker like Caleb & Brown, as they aggregate liquidity across OTC platforms, centralized exchanges, and decentralized exchanges, ensuring clients always get the best possible price on every crypto trade.

Want to learn more about the rapidly evolving cryptocurrency space? If so, we invite you to explore additional Benzinga articles. 

Frequently Asked Questions 


Can I buy crypto OTC?


Yes, you can buy crypto OTC. Doing so can help you quickly complete transactions and enjoy more confidentiality when compared to trading via traditional platforms.


Is crypto OTC safe?


Generally speaking, crypto OTC trading is safe and secure. However, some platforms are less secure than others. Always do your own research.


What is an OTC wallet?


An OTC wallet is a third-party application used to engage in OTC transactions. The wallet stores your funds or crypto assets and enables you to send them to another user in exchange for crypto or fiat money.