More people have joined the cryptocurrency market in the last few years. Generally, crypto trading deals with exchanging cryptocurrencies. It is similar to Forex since you can sell or buy cryptocurrencies. You can exchange your Bitcoin for USD or Euro or buy Bitcoin or other cryptocurrencies with the traditional currencies. Buying or selling cryptocurrencies can be done on various platforms. For example, it can be done over-the-counter or on the crypto exchanges.
Although more traders use the digital crypto exchanges, Bitcoin over the counter trading is also a good option for large-scale traders. Usually, Bitcoin OTC is trading option designed for high-volume traders. For traders with smaller orders, they can do it directly on the crypto exchanges. However, large-scale traders like the high-net-worth individuals, hedge funds, and private wealth managers opt for OTC Bitcoin trading.
Basically, OTC trading involves trading your cryptocurrencies outside the traditional crypto exchanges. High-volume traders choose to complete their trades outside the digital exchanges for various reasons. There is a higher risk of slippage if large orders are placed on the digital crypto exchanges. When slippage occurs, there would be price change from the expected one. Because the traditional exchanges may not have enough liquidity for your order, it would be a disadvantage. Because of this, a single order is split into other small orders.
After your large order has been split into smaller orders, such small orders will be traded at different prices. This would, in turn, cause the price to move to an unfavorable direction for the investor. This would be a disadvantage to the investor because the purchase would be more expensive than originally expected. There are, however, certain reasons why institutional traders and individuals with large trades should use a Bitcoin OTC broker.
1. More safety when using a trusted broker.
Over the past few years, crypto exchanges have been highly targeted by hackers. This has led to many losses for investors where some crypto exchanges have become victims. If you get a reliable Bitcoin broker, you will not be at the risk of attacks from hackers.
2. Faster trading.
For large-scale trades, it can take longer to complete the process if placed on the traditional crypto exchange. The longer trading period happens since traditional exchanges often lack sufficient liquidity for large volume trades. There is, however, faster processing time when you use an OTC broker.
3. Avoid trading limits.
Large orders would not be possible if a crypto exchange has set a trading limit. You would also face a limit on the amount you can withdraw. You will, however, not deal with such restrictions when using a Bitcoin OTC broker.