Over-the-counter (OTC)

Over-the-counter (OTC) can be understood as the process of trading “off market” or outside of a crypto exchange. Unlike typical trades which consist of automated buy/ sell orders on exchanges, OTC trades are done directly between a buyer and seller, or facilitated by an intermediary like a trading desk or a broker.

OTC trades are usually utilised by parties who want to trade large sums of money and can benefit from better pricing available in these private deals. Large orders on exchanges can move market prices. With OTC, buyers do not have to rely on multiple sellers to fulfil their large order which has the effect of moving prices upwards, making it more expensive for the buyer.

OTC trades are not only limited to large buyers, but also enable traders who do not have access to crypto exchanges (e.g. in jurisdictions where it is not permitted) to purchase cryptocurrencies, or to obtain financial instruments that are not typically available on exchanges. Buyers or sellers who want to avoid being monitored by banks or other entities that may block or freeze large transactions may also utilise OTC trades.

(References: CMC, Cointelegraph, Investopedia)

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