Institutional and big-whale investors are using OTC markets for cryptocurrency trades rather than conventional crypto exchanges according to a recent study by Forbes.
OTC markets have become the safest and best leeway for big-time investors such as large institutions to invest and trade in cryptocurrencies because of a number of logical reasons. The OTC market offers a private perspective and less consequential alternative to the crypto exchange, by providing a safe platform for large-scale investors to offer trades and make heavy transactions without immediately destabilizing the market.
Large Bitcoin Deals Over OTC
That large-scale and institutional investors choose the OTC route to trade in the bitcoin space is, in reality, no major shock at all, given regular exchanges in the world do not even allow transactions that barely border on multiples of $10k. Coinbase for example, being one of the biggest exchanges in the world, and the leading crypto trade platform in the United States only allows its customers to trade a maximum worth of $25,000 in a day, while other exchanges are even smaller in comparison. Kraken, another exchange based in the US has its daily cap set at $2.5k per day and a maximum of $20k in a month while Circle, a familiar collaborator of Coinbase, has its maximum cap set at $3k in a week.
The limitations imposed in these crypto exchanges are necessary and important for the sustenance of the market even if they seem overly tight. A large trade of a multi-million dollar magnitude could affect or destabilize the cryptocurrency market even before it is completed if it is dealt with in a similar fashion to fairly small funds as in conventional crypto exchanges. Online cryptocurrency exchanges do not and cannot offer the necessary infrastructure and liquidity required to complete transactions of those magnitudes.
“The big deals have to go OTC. A lot of the exchanges limit the order size, so you have to break up your orders, and that’s just fatal,” Monica Summerville, the director of fintech research at Tabb Group observed, in an interview with Forbes.
OTC Issues and Solution
Over-the-counter methods have their limitations too though as they could be risky. With a bulk of deals being completed over Skype and Telegram channels, OTC trades can be subjected to distrust issues.
Silicon Valley blockchain startup OTCXN, and promising blockchain platform, Caspian are one of the few workings to create solutions that would eliminate distrust tendencies in OTC markets.