Over-the-Counter (OTC) trading is a private deal between a buyer and a seller. There is no central order book where everyone can see prices. Instead, the two parties agree on a price and settle the trade in a way that works for them. This makes the transaction less visible than trades on an exchange. In crypto, OTC trades often happen through brokers or desks that connect buyers and sellers, so large amounts can be traded without affecting the market price.
Many people use an OTC desk or broker. The desk finds the other party, helps negotiate the terms, and assists with settling the trade. Sometimes, both sides use custody or escrow services to make sure everyone delivers as promised. These middlemen help things go smoothly, especially for large trades.
People use OTC when they want to move large amounts without affecting the public market price. Big orders on an exchange can cause slippage, which means prices move against the trader. OTC lets buyers and sellers make deals privately and often negotiate special terms for unique needs.
OTC markets attract big players like institutions, hedge funds, exchange OTC desks, wealthy individuals, and specialized brokers. There are dedicated platforms to connect these groups, and some firms offer full-service desks that handle custody, compliance, and settlement.
Private trading comes with extra risks. Counterparty risk is higher because people often rely on trust or contracts instead of exchange rules. Prices are less transparent, so it can be harder to know if you got a fair deal. Some OTC trades may also have less regulatory oversight, and in thin markets, liquidity can still be a problem.
Regulators are watching OTC activity more closely as more institutions get involved. Some places now require reporting or use the same rules as other markets. At the same time, more services are offering compliant OTC solutions to meet the needs of bigger, more careful buyers.
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