OTC Cryptocurrency Exchanges
An OTC cryptocurrency exchange is an online marketplace where individuals and parties can trade fiat currency for cryptocurrencies. This model is popular with project managers and high-net-worth individuals who need to trade large amounts of cryptocurrency. Traditionally, ICOs required parties to negotiate with multiple sellers to get the best price. But now, these transactions can be executed between two OTC desks without the middleman. A good OTC exchange will make the entire process smooth and quick.
An OTC desk works by using an aggregated exchange order book or network to find the best price for a particular asset. It executes customer orders and checks available liquidity to determine the price. To trade with an OTC exchange, you must complete a KYC process, deposit funds or coins, and complete a trade. OTC desks are the best way to buy and sell crypto. However, you should be aware that they may not have the best liquidity.
OTC crypto exchanges are made up of two basic types. There are exchanges with centralized order books, and then there are dark pools. These exchanges operate on a peer-to-peer basis and do not have order books. These exchanges typically work with large investors and do not allow for public transactions. However, they are more expensive than OTC exchanges and can only be used by large investors.
Decentralized OTC crypto exchange
A major difference between an OTC exchange and a traditional cryptocurrency exchange is the security of an OTC trade. An OTC exchange will protect your funds against hacking. Because it uses a trusted broker, the exchange has a lower risk of hacking. You can also avoid slippage by placing your trade through a trusted broker. Insufficient liquidity will result in split orders, which may result in a higher price than the one you originally wanted.
Types of OTC Cryptocurrency Exchanges
Some of the largest and most trusted cryptocurrency exchanges use OTC desks to settle trades. These exchanges often deal in billions of dollars each day. While this volume is far less than the trillion-dollar volumes of major exchanges, it shows that the market is still moving and will continue to do so in the future. The rise of OTC crypto exchanges is a good thing for digital assets and cryptocurrencies as a whole.
OTC cryptocurrency exchanges can be divided into two main categories: centralized and decentralized. The former is more convenient for newbies and offers more advantages. However, some crypto enthusiasts object to centralized exchanges because they do not conform to the decentralized philosophy of crypto. Centralized exchanges typically impose Know Your Customer rules, which require users to disclose their identities. Centralized exchanges also present an increased risk of hacking.
As the OTC market has more volume, it is important to understand the difference between these two types of exchanges. Lit pools display various bids and offers to their dealer network, and dark pools offer liquidity to institutional investors. These exchanges can facilitate large volumes of cryptocurrency without a visible order book. Some of the most popular ones are listed on major exchanges. However, there are many nuances between them. In general, a lit pool is more accessible than a dark pool.