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All You Need To Know About Bitcoin OTC Versus Exchange

bitcoinbrokerguideApr 3, 2018, 4:10:21 PM

A bitcoin exchange refers to a digital marketplace where bitcoin traders buy and sell bitcoins with the use of different altcoins or fiat currencies. It is an online platform acting as an intermediary between sellers and buyers of the cryptocurrency. Since the creation of bitcoin in 2009, this digital currency has been consistently used in trading through off-exchange OTC transactions.

As more participants joined the market and trade sizes increased, there are more intuitive techniques of OTC trading through dealers and brokers. Now, OTC trades occurring are facilitated by professional and institutional dealers, bitcoin broker, and traders. Brokers earn profits by charging service fees for their services. They can also earn a profit when they add a spread to quoted prices. Bitcoin exchanges operate over-the-counter or OTC to help clients in executing larger transactions.

When to trade on bitcoin exchange versus OTC? Completion of trades OTC can be time-consuming. It is best to take advantage trading directly through an API, most especially for bitcoin payment processors, bitcoin ATM operators, and wallet companies looking to hedge liquidity when selling or buying. Trading is automated on a bitcoin exchange, unlike OTC. If you aim to actively trade movements of prices or create real-time markets, you can benefit from the exchange. However, if you want to trade large quantities, the extra effort and work of an OTC transaction can result in higher prices for all the parties involved. There is no definite rule on when OTC transactions become more competitive and better than the exchange market. However, experts highly recommend OTC transaction for trades worth $250,000 or higher.

There are different factors to consider when you are negotiating the price of a bitcoin OTC transaction. These factors include the size of the transaction, the leverage each party possesses in the negotiation, and the preferences of the counterparty. All bitcoin over the counter transactions start by searching for a counterparty for the trade. The buyer communicates the trade size, the venue of trading, and the asking price once there is an established relationship. The seller responds with the offer price in a percentage above the price of a leading exchange. Once the price has been set, and there is confirmation of the transaction, funds will be then transferred. Lastly, the buyer sends a bank transfer for the purchase price to the seller, then the seller sends the bitcoins to the buyer. Find out more about bitcoin OTC and seek a broker today by visiting our homepage or website now!