Top 5 Bitcoin OTC Brokers: Efficiently trade large volumes of Bitcoin

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What’s are Bitcoin Over-the-Counter (OTC) brokers?

Over-the-counter (OTC) are entities that allow the buy and sell of large quantities of Bitcoin and other cryptocurrencies. OTCs offer more private and personalized services to institutions and high net-worth individuals who need a high degree of liquidity and privacy. The key advantage to an OTC is that they handle large trading volumes, such as trading $100,000+ USD without price slippage. OTC traders will normally quote a strike price for the entire order block with immediate execution. This is contrasted with trading on cryptocurrency exchanges where large orders will cause the price to decrease due to a lack of buy orders. OTC desks allows institutions and high net-worth individuals to buy Bitcoin without a having dedicated trading desk.

OTC offices can be either regionally located, serving local clients or global. Often major cities such as Hong Kong, Tokyo or New York have OTC brokers servicing local clients. These brokers can provide very personalized services and even in person meetups. In contrast, global OTCs such as Binance OTC handles transactions over the internet.

Traditionally in the stock market world, OTC desks facilitate trading of securities that are not listed on formal exchanges, e.g. the New York Stock Exchange.

Benefits of trading via an OTC broker

  • High Liquidity – Dedicated traders from OTC desks will help increase the liquidity of the overall market. This means they can handle large order blocks
  • Fixed Price – OTC brokers will over a quotation for the entire order block. This means orders are not affected by price slippage.
  • Easy Fiat Options – Brokers will have local bank accounts and can sometimes even accept cash.

Disadvantages of trading via an OTC broker

  • Limited range of cryptocurrencies – Often OTC brokers specialize on a few cryptocurrencies. This means unlike exchanges, they will no offer 100+ trading pairs.
  • Manual trading process – Traders are executed by a human counter-party. This trading times will often be limited to regular office hours.
  • Large order size required – Brokers often have a minimum order size, such as $100,000 USD traded within a certain period of time.

How do OTC Brokers work

OTC desks have a network of buyers and sellers. The trades themselves are facilitated by OTC broker-dealer who will locate and negotiate directly with prospective buyers and sellers over computer networks or by phone. This is contrasted from trading over exchanges where the prices and order books are publicly available. For OTC desks, their broker-dealers will negotiate the trade price for you. Trades are also not publicly listed giving the parties privacy.

Therefore, to fully understand what is going on in the cryptocurrency markets it is important to consider what is also happening at OTC desks. This is because large transactions happen on them on a daily basis.

Bitcoin OTC vs Exchanges

The choice of whether to use a Bitcoin OTC or Exchange depends largely on the volume of orders. Big players looking to buy or sell large quantities of cryptocurrencies are better off using an OTC broker. This is because a single exchange (no matter how large) will not have the liquidity necessary to fill large order blocks. Research has shown that sell orders of $30 Million can significantly suppress the price of a cryptocurrency, hence causing slippages of 5-10%. This amount is much larger than the fees charged by OTC brokers. The second advantage of using OTCs is that they can offer to lock in a particular quotation with the option to settle at a later time. This gives people additional flexibility to move funds from banks or cold-storage (such as the Ledger Nano X).

However, depending on who you are, one upside or downside of OTCs is that they are not transparent. So while you can try to gauge whether there is a lot of trade flow through an OTC desk by reading their reports (if any), there is no way you can verify if they are being truthful. On the other hand you can conduct trades privately compared to on exchanges.

How to trade Bitcoin with OTC Brokers

This guide outlines the general steps involved in trading with Over-the-Counter Brokers. Generally speaking, brokers provide similar on-boarding and trading experiences. It is important to remember all brokers will require verification of your identity, known as Know-Your-Customer (KYC) registration. On top of this, brokers will verify the source of funds to prevent money-laundering.

Time needed: 3 days.

How to trade with Bitcoin OTC Brokers

  1. Signup

    Sign up to the broker via website, email, call or in-person meetup. They will usually ask about the type and quantity of cryptocurrencies you would like to sell.

  2. Onboard

    Every broker will require you to fill in onboarding documents and legal disclaimers. They will also ask you to provide various types of documentation such as a Government ID, Proof of Residence and Proof of Income.

  3. Communicate

    Once on-boarded, they will give you a communications channel. Typically this involved a messaging platform where you can request quotations for orders such as:
    You: “I would like to buy 100 Bitcoin”
    Trader: “We can offer 100 BTC at a price of $8123 USD per BTC”

  4. Confirm trade

    You can choose whether to accept the price quotation or not. If you agree, the trade is immediately confirmed and the trade will provide you with a deposit address.

  5. Trade Complete

    Once the deposit is received, the order is no fully executed and you will receive your trade

Top OTC Brokers around the world

When trading with OTC brokers, it’s important to only use trusted and regulated brokers. This is important because of the large transaction sizes involved – you don’t want to get delayed or even scammed out of a transactions. We compiled the list of the biggest OTC brokers around the world

Name:
Circle
Location:
USA
Minimum Trade:
$100,000
Fees:
0.1%
Register:
Join Now
Rating:
4.6 Star Rating
Name:
Binance OTC
Location:
Malta
Minimum Trade:
$100,000
Fees:
0.1%
Register:
Join Now
Rating:
4.3 Star Rating
Name:
Genesis Block
Location:
Hong Kong
Minimum Trade:
$100,000
Fees:
-
Register:
Join Now
Rating:
4.5 Star Rating
Name:
OSL
Location:
Hong Kong
Minimum Trade:
$100,000
Fees:
-
Register:
Join Now
Rating:
4.5 Star Rating

Bitcoin OTC in China and Hong Kong

Bitcoin OTC brokers play a very important role in China due to a government ban on cryptocurrency exchanges. In China, it’s no longer legal to operate a cryptocurrency exchange due to a legislation change in 2017. This has left large Chinese exchange as OKex, Binance, Genesis Block and Huobi operating overseas or as OTC brokers.

Currently Bitcoin OTCs brokers are legal in China. They operate by directly connecting buyers and sellers of Bitcoin. However, Chinese financial institutions such as Alibaba’s Alipay have distanced themselves from OTC transactions, stating that they will “immediately stop relevant payment services“.

There’re several reports about @Alipay being used for bitcoin transactions. To reiterate, Alipay closely monitors over-the-counter transactions to identify irregular behavior and ensure compliance with relevant regulations.  If any transactions are identified as being related to bitcoin or other virtual currencies, @Alipay immediately stops the relevant payment services.

AliPay official statement

Interview with OTC Brokers

Travel with me to Genesis Block in Hong Kong to see what’s happening with trading behind the scenes and Over the Counter (OTC).

OTC money laundering and criminal activity

One of the biggest concerns of OTC brokers and trading is the risk of exposure to criminal funds. This is because OTC desks who do not perform proper due diligence on source of funds can come into contact with tainted coins. In a 2020 report, cryptocurrency research company Chainalysis released a report on money laundering in the exchange and OTC space. The report accused some OTC desks of illegally taking laundering funds for private clients. In order to protect yourself from such activity, ensure you are trading with legitimate brokers who have proper KYC. On top of this, never buy “discounted” Bitcoins offered on social media such as Instagram or Facebook.

Frequently Asked Questions (FAQ)

Will OTC brokers accept cash?
Often OTC brokers will have a cash option – for both buying and selling Bitcoin. It’s important to remember for large quantities of cash, KYC registration is required. On top of this, proof of funds may also be requested.

Do OTC brokers require my Identity?
To comply with anti-money laundering laws, OTC brokers will require you to submit official documentation such as Identity, Proof of address, bank account statements, proof of income or proof of funds.

Is there a Bitcoin Limit?
Most OTCs do not have a maximum limit on the amount of Bitcoin you can buy or sell. Order sizes of 100 or above BTC are common place for these brokers. However, some brokers will have a minimum order size, such as $100,000 USD.

How do I buy Bitcoin Anonymously (Privately)?
The best way to buy Bitcoin without a record is via cash or peer-to-peer transactions. It is important to remember this contains inherent risk as you’ll need to do your own KYC and potentially offer a proof of funds in the future.

Are there OTCs for Altcoins?
There are OTC services for altcoins and even coins that are not yet listed on exchanges. These OTCs will function similar to a matchmaker – matching sellers and buyers of a particular asset. One such example is Silverway – an OTC deal platform and deal aggregation platform.

How do I find out the volumes handled by OTCs?
OTCs are no obliged to provide trading data such as daily volumes, prices or order books. However, some OTCs provide annual reports or blog posts which contain aggregated volume data.

1 COMMENT

  1. How does OTC broker actually trade the coins? Are they transfer to/from internet exchanges? Why when a large OTC transaction happens the price of the coin moves on all exchanges at the same time and the same level?

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