Over the counter (OTC) option is seen to be popular amongst Bitcoin (BTC) buyers according to data from Diar. The information has also expanded the shortage of sellers in Crypto OTC markets.
According to the data, OTC Crypto markets have seen a considerable rise, while trades on Cryptocurrency exchanges this year has witnessed a significant fall.
An OTC transaction is when a trade takes place between two parties directly, unlike on an exchange where orders are matched between third-party buyers and sellers.
Diar suggests that institutional investors are leading to the rise in buying BTC from OTC. Institutional investor Grayscale, owned by Barry Silbert’s Digital Currency Group is seen to hold 203,000 BTC which is more than 1% of Bitcoin’s supply. It has increased its holdings from 30,600 BTC to 203,000 BTC in the year 2018.
OTC trading desks are seen to offer services which are relatable to institutional investors. Institutional investors are looking at higher liquidity being, and so Cryptocurrency exchanges may not be the suitable option. Another factor to be considered is that OTC markets are still maintaining levels which are more attractive to institutions compared to Crypto exchanges which are seen to be more volatile.
The tight regulations through 2018, such as KYC requirements has led to institutional investors looking at simpler options such as OTC for Crypto.
Such an increase in demand from institutional investors such as Grayscale have not reflected in the Cryptocurrency exchange market, and so clarifies that OTC is a favorite among institutions. Hence it proves that OTC trading is a detrimental impact to the bear markets seen for the Cryptocurrency markets.
No wonder, Coinbase had opened its OTC Crypto trading desk in November. Coinbase’s head of sales, Christine Sandler highlighted that institutions are using OTC as an on-ramp for Cryptocurrency trading.
It’s not just Coinbase that has picked up on this trend, but all major Crypto exchanges in the US are starting to offer OTC trading services.
Image Source – Wikimedia Commons
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