Boxmining

Tag: otc

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

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

    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 not offer 100+ trading pairs. Instead, they will focus on the major popular cryptocurrencies that have high trading volune and interest such as Bitcoin, Ethereum or some stablecoins.
    • 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 US$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 or giving you the best price. On the other hand you can conduct trades privately compared to on exchanges and the price will be “locked-in” and not subject to any fluctuation between the time of agreement and the time of settlement.

    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.

    Summary of how crypto is traded with an OTC broker
    Summary of how crypto is traded with an OTC broker (Image credit: Genesis Block)

    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

    [wp-compear id=”5277″]

    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 exchanges and OTC desks such 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).

    Vlog: Crypto Trading/ Market Manipulation/OTC Markets

    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. The type of identification required however would depend on the OTC brokers own company requirements and any information as required by the laws of the relevant jurisdiction.

    Is there a limit on how much cryptocurrency I can trade with an OTC?

    ost 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 commonplace 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 proof of funds in the future. You should also check that your counterparty is a legitimate trader and not a scammer as there are incidents of people being robbed during these “trades”.

    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 not obliged to provide trading data such as daily volumes, prices, or order books. However, some OTCs provide annual reports or blog posts that contain aggregated volume data.

    What should I look out for when choosing OTCs?

    Security and legitimacy are very important with thinking of which OTC desk to trade with, especially since huge sums of money are involved. Prospective customers could for example, check if the OTC desk is registered with the relevant government authorities, ask any peers if they have traded there before and their feedback, check online reviews or social media, or even go to their physical offices to make inquiries before signing up and trading.

  • Secrets of “Darkpools” and unreported trade volume and Bitcoin OTC

    Secrets of “Darkpools” and unreported trade volume and Bitcoin OTC

    In Crypto, not all trade volumes are visible – in fact “Darkpools” account for a huge amount of crypto trading and has an enormous impact on cryptocurrency prices. Darkpools include peer-to-peer trading, such as on sites like localbitcoins.com and also Over the Counter (OTC) desks. The reason why it’s unreported is because deals are done privately, for example Peer-to-peer trading can be done in person and with cash, leaving virtually no trace of the transaction ever happening. Large volumes are also traded OTC – this is more organised as private buyers and sellers are matched, with some form of escrow to allow the transaction to take place. OTC desk sometimes even require minimum volumes, like $100,000+ USD to up to 1 Million.

    First things first. What’s an Over the Counter (OTC) desk?

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

    The trading of cryptocurrencies on OTC desks is similar to those in traditional markets.

    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.

    What does a trader at an OTC desk do?

    Traders at OTC desks are the broker-dealers mentioned above. Their role is to locate and match buyers and sellers, and negotiate the best deal for all the parties involved.

    Part 1: Crypto trading/ Market Manipulation/ OTC Markets

    Therefore, it is important for traders at OTC desks to have a keen eye on the cryptocurrency markets and be knowledgable of the market trends.

    I had the opportunity to interview Charles Yang, Head Trader at Genesis Block Hong Kong, an OTC desk. In my interviews we discuss what’s really happening at OTC desks away from the public eye. We also discuss his thoughts on the market sentiment.


    Is Tether Safe? Will Bitcoin & Ethereum Recover? 

    Secrets and Insights from an OTC Trader

    Here’s a summary of the key points from the interviews with Charles.

    There is still interest in cryptocurrencies

    Charles observes there is revived interest in cryptocurrencies despite this bear market.

    He notes that a lot of the customers from the OTC desk who were previously dormant have recently contacted them wanting to buy and sell cryptocurrencies.

    The risk of Tether is exaggerated

    Firstly, what is Tether? Refresh your memory with our Tether Explained guide below:

    We’ve seen in recent news that USDT is not fully backed by cash. Instead, Tether is around 75% backed by cash, and the remaining 25% by other securities or loans.

    Confused with what’s happening in this Tether scandal? Check out our video below which explains what is happening and the latest legal action surrounding Bitfinex.

    Despite this, there is still demand for USDT in Asian countries such as China, where they are buying USDT at a premium.

    This is because China bans cryptocurrency exchanges, so retail investors cannot buy cryptocurrencies such as BTC. What they do instead is they first buy USDT through peer to peer merchants, and then enter the cryptocurrency market at a later time when conditions are right. 

    Right now, Bitfinex who is being accused of “losing” customers funds is more at risk. Bitfinex will have to go bust first before people question USDT.

    Charles believes that fundamentally short trading would have less losses because if USDT is at 97% and your prediction is wrong, then your loss would only be 3%. Whereas the opposite would be to bet that it goes to 0.

    Mining is still profitable

    The recent “official news” in China was that cryptocurrency mining has been banned.

    Despite this ban, Bitmain is coming up with new models and generally summer is big for mining because electric costs falls.

    There may be miners who start accumulating and building to maximize their margins 

    Charles notes there is news that big players are scrambling to get cheap damaged mining rigs. They are not the newest models but there are still returns from using them to mine cryptocurrencies.

    So despite the official news about China banning mining the word on the street is that people are buying rigs and locking in contracts for the summer months.

    Simple guide to the aftermath of the Chinese Bitcoin mining ban

    Initial Exchange Offerings (IEOs) are risky, but need not be avoided completely

    If you participate and get allocation you would benefit. But ultimately it is the exchanges that benefit because you need to buy their token to participate.

    For example Binance requires you to buy into IEOs with their BNB token. Of course it’ll be great for you in the short term if you get allocation and the coin pumps. However your risk is that you would be left with the exchange token if you don’t manage to get any allocation after the lottery.

    IEOs are also highly volatile, especially immediately after listing

    It may be better to trade with OTC desks than exchanges

    Charles notices that there is quieter trade flow, so big players looking to buy or sell cryptocurrencies need to offer better prices. Therefore the margin between the buy and sell price is much less. Bigger players also can offer better quotes because of volume. Therefore it may be cheaper to trade with OTCs who deal exclusively with larger orders than exchanges.

    And whilst exchanges require you to have the funds ready at the time of transaction, OTC desks allow you to lock in the prices and settle later. This gives people more flexibility .

    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.

    What coins to hold? Bitcoin Bitcoin Bitcoin (BTC)

    Unlike other coins, Bitcoin (BTC) has a 10 year history. There is no founding team or leader. For this reason it is not affected by company politics and is the most decentralised.

    We can see the prices for a lot of tokens crash during the Initial Coin Offering (ICO) crash. Some may be due to the project running out of funds, failing to deliver on its promises or in worse cases the founders and key personnel leaving the project altogether. Studies were shown that over 80% of ICOs in 2017 were scams.

    I was standing in the same spot glued to my phone for 2 hours when this all went down.

    We also see that the ICO game was not fair, some people were able to purchase tokens for a more favourable rate or terms even before the token was listed to the public. This however would never happen with BTC.

    Is day trading profitable? No (sorry)

    For retail investors, day trading is not profitable even for traditional markets.

    This is because retail investors would be bogged down by trading fees, but not all trades are profitable.

    Retail investors are also unprotected from market manipulation. This is especially true for cryptocurrency investing, which is generally an unregulated space.

    Don’t do this

    Conclusion

    Ultimately, trading cryptocurrencies requires exercising caution and doing your own research. One can look at OTC desk reports to have a good grasp of what may be quietly happening with some big players, but at the end of the day, question everything. Also, whilst you may stand to gain several times your initial investment by going into highly volatile IEOs, bear in mind it is designed so that exchanges ultimately win. The most prudent thing to do is to never invest more than you can lose.

    Links

    Buy Bitcoin in Hong Kong – https://buybitcoinhongkong.com/