What Is OTC Trading?
Also known as: Over-the-Counter, OTC, OTC Trading, OTC Desk
In short
OTC (over-the-counter) trading is the buying and selling of cryptocurrencies, usually in large amounts, directly between two parties or through a broker's OTC desk instead of on an open exchange order book.
If a large investor tries to make a high-value purchase directly on an exchange with a market order, they can consume many sell orders in the order book and push the price up, and they may bear a higher average cost than expected because of slippage. OTC desks solve this problem by matching the buyer and seller off the exchange or by filling the trade from their own inventory. The price is agreed in advance between the parties, and the trade is completed in one go, without showing up in the order book.
OTC services are generally used by institutional investors, funds, mining companies, and high-balance individual investors. Many large cryptocurrency exchanges run their own OTC desk; independent brokers also offer this service. High-value conversions between fiat currency and cryptocurrency also mostly go through these channels.
The fact that OTC trades are not visible in the open market reduces transparency and makes it harder to track price formation. Counterparty risk is an important issue; fraud is common, especially in direct trades with unknown people. For this reason, regulated intermediaries, escrow structures, and KYC/AML compliance are preferred. In Turkey, crypto asset service providers were placed under the permission and supervision of the Capital Markets Board (SPK) with the 2024 legal regulation.
Last updated: · This content is for information purposes only and is not investment advice.