What is an OTC platform, and how to choose it?

OTC crypto trading booms 106% as businesses seek large trades without slippage; here’s how to choose the right platform.

The crypto OTC market grew by 106% last year, driven by the U.S. presidential election and rising demand for stablecoins. However, the main driver behind the growing popularity of OTC trading is its value to businesses.

Imagine a company trying to buy a massive amount of Bitcoin on a regular exchange. The moment the order is placed, the price jumps, and suddenly, they pay way more than expected. Frustrating, right?

That’s where OTC (Over-the-Counter) platforms come in. They let traders move large sums without influencing the market. But not all OTC platforms are equal, so how does someone pick the right one? Let’s break it down.

What is a crypto OTC trading platform?

A crypto OTC platform facilitates direct trades between buyers and sellers, bypassing public exchanges. It is ideal for high-volume traders who need privacy and minimal market impact.

The crypto OTC platform by CryptoProcessing is one of the recognized leaders in the market due to 20+ cryptocurrencies supported, zero customer funds in use, and deep liquidity pools. It doesn’t charge monthly fees, which makes it rather cost-efficient. OTC requests are processed within 24 hours, which makes transactions fast and efficient. 

Here is how a crypto OTC platform works:

1. Finding a counterparty

A trader initiates a transaction on a crypto OTC platform or contacts a broker specializing in large block trades. The platform or broker matches them with a suitable counterparty.

1. Negotiating the trade

The platform or broker assists in price negotiations. Once both parties agree, the trade is executed privately to prevent market fluctuations.

1. Settling the transaction

Settlement is completed through bank transfers, crypto wallets, or escrow services, ensuring security and reliability.

What are the advantages of OTC trades in crypto?

OTC trading platforms offer valuable benefits for institutional investors and high-net-worth individuals:

• Privacy

OTC platforms provide a confidential trading environment. Transactions are private and conducted directly between buyers and sellers without intermediaries. It allows institutional investors to execute large trades without revealing strategies or affecting the market.

• Price stability

Traditional exchanges experience price fluctuations when large orders are placed. OTC platforms prevent it thanks to direct negotiations, which ensure more stable pricing, even for high-volume trades.

• Reduced slippage

Slippage happens when orders are filled at different prices due to market volatility. OTC trading reduces this risk due to pre-negotiated transactions. It serves to ensure traders receive the expected price.

• Low fees

OTC platforms charge lower fees compared to public exchanges since trades typically involve much larger amounts.

• Customization and flexibility

OTC trades can be tailored to meet specific needs. Traders can negotiate terms, set conditions, and access assets not listed on public exchanges.

• High liquidity

OTC platforms maintain deep liquidity pools, which allow large orders to be executed without impacting market prices.

How to choose an OTC Platform?

Choosing the right OTC platform for trading crypto assets is important for businesses. Here’s what to consider:

• Currencies supported

The first factor to evaluate is the range of crypto and fiat currencies the platform supports. With Bitcoin accounting for 22% of OTC trading volumes in 2024, it’s essential to select a platform that supports the most common cryptocurrencies and fiat currencies.

• Trading limit

Opt for platforms with high trading limits. These platforms accommodate large transactions. For instance, CryptoProcessing by CoinsPaid allows crypto purchases starting at €1 million, providing all the benefits of OTC trading.

• Trading pairs

Understanding which trading pairs the platform supports is important to avoid issues with asset exchanges or settlement delays. It’s better to clarify this point beforehand to ensure smooth transactions.

• Registration jurisdiction

Jurisdiction matters because each region has its own regulations for OTC platforms and liquidity providers. Thus, CryptoProcessing is located in Estonia, known for its effective, reliable regulations, ensuring high-quality services. 

• Type of liquidity provider

Check whether the OTC platform operates as a Principal or Agency market. Principal-based platforms typically offer faster execution and better service.

Choosing the right OTC platform is a strategic decision that directly impacts the efficiency of large crypto transactions. It’s about finding a platform that offers the right liquidity, privacy, and flexibility for your business. By carefully evaluating factors like supported currencies, high trading limits, and regulatory jurisdiction, users get access to beneficial, cost-effective trades and protect their company’s interests in a highly competitive market.