Reports say that in 2018, the volume of trades on the OTC cryptocurrency market was two to three times higher than on the crypto exchange market. TABB, a company that studies the capital markets, showed that the amount of Bitcoin traded on crypto exchange markets was close to $4 billion per day. This means that between $8 billion and $12 billion were traded on the OTC crypto market.

In the last two years, the amount of trade in both markets has grown by a lot. According to data from March 2020, Bitcoin worth more than $20 billion is traded every day on the over-the-counter markets. In the end, the cryptocurrency exchange development services have grown quickly.

What does OTC stand for?

There are two kinds of traders in any financial market: buyers and sellers. Then, to organize these financial markets, we either need an exchange or an over-the-counter market (OTC) (Over the Counter).

The exchanges help buyers and sellers make a deal by acting as a middleman. First, buyers and sellers put their orders in open order books. Second, the orders list the asks (the price to sell) and the bids (the price to buy). When the ask and the bid are the same, the trade happens. It's important to remember that these trades happen in public and can affect the market. In a broader sense, this is how bitcoin trading exchanges are set up for trade.

Also Read Here: How Peer To Peer Cryptocurrency Exchange Platform Works

On the other hand, OTC trading is done directly between two parties without revealing their identities. In most OTC trades, one of the two parties is a desk. The main services that an OTC desk offers are trade execution and settlement. In OTC trades, it's interesting that both crypto-to-crypto and crypto-to-fiat trades can happen. An OTC trade can only happen when the two parties agree on the price. Since it is a direct way to exchange crypto, trades on the OTC market are always secret and anonymous. No one but the people involved in the trade knows the details, like the price and the amount.

There are different kinds of OTC trading:

Dealer, Trader:

In this kind of over-the-counter (OTC) trading, both the dealer and the trader are using their own money. Or, they could be trading for someone else through their own account. In this kind of over-the-counter (OTC) trade, buyers and sellers find each other in private, public, and chatrooms for brokers only. The following things can be:

• Brokers offer safe chat rooms.
• Chat rooms on Skype
• Telegram and LinkedIn link

OTC Brokers:

These are middlemen who help buyers and sellers find each other.

Use OTC desks at an exchange:

Some cryptocurrency exchanges have OTC desks where they buy and sell large amounts of cryptocurrency in secret.

How does an over-the-counter crypto desk work?

In general, an OTC crypto desk works the same way as its counterpart on the traditional market. The OTC crypto desks are set up so that they can connect to a number of liquidity providers. This makes it possible to buy and sell a lot of crypto assets without moving the market.

An over-the-counter (OTC) crypto desk keeps its own order book.

• This book keeps track of things like customer orders, liquidity between dealers, and the order books of more than one exchange.
• A lock-in price can also be given by an OTC desk. But the price is only set for a certain amount of time.
• The OTC trading platform development services make sure that the desk is built so that slippage (the difference between the price that was actually executed and the price that was expected) doesn't happen.

OTC trading's pros and cons

A crypto exchange development service provider is in charge of making sure the crypto exchange or OTC trading platform is safe and easy to use. But both OTC trading platforms and exchanges have pros and cons that are unique to them.

OTC Pros

• Over-the-counter platforms are better for traders who buy and sell a lot of shares. Because the trades are anonymous and can change the price of crypto assets on the market, this is the case.
• There is no exchange risk because the assets are traded directly between the parties.

OTC Frauds

• Since OTC platforms offer more privacy and anonymity, the transaction fees are usually higher.
• Some over-the-counter (OTC) desks might have a minimum order amount.
• Settlement risk is involved.

Conclusion:

A few years ago, there were no OTC desks. Today, the number of OTC trades has grown by a factor of ten. But the infrastructure hasn't grown yet, so there's a lot of room for OTC platforms to grow.

Whether you need a white-label cryptocurrency exchange or want to start from scratch, Suffescom Solutions Inc. mission-driven solutions will meet your needs.

Set up a free demo of our "white label" cryptocurrency exchange solution or talk to their experts about your needs for developing a cryptocurrency exchange.