Acctual Team
•
May 1, 2025
If you're looking to trade hundreds of thousands or even millions of dollars worth of crypto, then it's critical to understand OTC crypto trading.
It’s a trading method that enables individuals and institutions to lock in the best rates, avoid hefty fees and reduce slippage in the market.
For an institutional investor, OTC desks provide ways to enter the crypto market safely and reduce technical complexities. Adding to this, high-net worth individuals can also take advantage of more personalized and private trading styles.
It's the solution that allows you to execute large trades without publicly broadcasting your moves or affecting market prices.
What is OTC in crypto?
OTC in crypto stands for "over the counter." It's a crypto trading method that occurs directly between two parties without the need for a public exchange.
Rather than using a conventional exchange platform, an OTC trade is conducted privately, often via an intermediary. Most commonly, a cryptocurrency OTC desk operates as the intermediary, facilitating the trade and providing liquidity away from a traditional order book.
It's worth noting the term isn't actually unique to crypto. OTC markets exist in traditional finance too, where they're used for large trades of stocks, bonds and derivatives.
With no need for public order books, this type of transaction often involves a negotiation process. Prices can be discussed directly between the buyer and the seller, but are typically facilitated by the intermediary OTC desk.
Overall, using an OTC crypto trading desk offers a more discreet and efficient alternative to trading on a public exchange. For large buy and sell orders, you can enjoy flexibility, personalization and even better pricing on your large volume trades.
It's an invaluable tool for serious investments in cryptocurrency. Plus, OTC marketplaces can offer deeper liquidity to help facilitate these huge transactions without creating market price moves, while deals can complete more quickly and adaptably than a traditional exchange for large trades.
Why is OTC necessary?
If the whole idea of blockchain and crypto is its peer-to-peer, accessible design, why do we need OTC?
Price slippage
Well, when dealing with large trades in the hundreds of thousands or multi-million dollars, OTC helps reduce direct market impact. For example, a large trade on a public exchange can cause significant price slippage.
If millions of dollars were to line up as a single buy order on an exchange, it could push the market price up, causing the buy order to execute at higher prices and temporarily pushing prices up across the exchange. The OTC options stop prices from skyrocketing or plummeting during large transactions.
Privacy
Enhanced privacy is another massive component for large institutions and high-net-worth individuals. On a public exchange, all orders are visible to the public, whereas OTC transactions are carried out in private, being executed behind the scenes.
This is a way to keep trading strategies confidential from competitors and protect high-net-worth people from becoming targets of fraud and crime.
Business use cases
When it comes to business use cases, many businesses lean on OTC as well, not just crypto traders.
For example, let's say a Nigerian importer needs to get their NGN into CNY. They could go to an OTC desk like Yellow Card to trade their NGN for USDT, then trade their USDT to USD to CNY and receive it via the SWIFT network.
Liquidity
Liquidity is also critical for large orders. OTC desks offer deeper and more flexible liquidity as they're able to aggregate liquidity from multiple sources. This gives the top OTC desks the ability to handle orders that range from as low as $50,000 up to over $100 million.
How does OTC trading work?
The first step to OTC trading crypto is finding a reputable broker that has a strong track record and is a trusted name in the industry. Most of the major, well-known global exchanges like Coinbase, Kraken or Bitso have dedicated OTC desks
This allows you to place orders directly within the platform or talk directly to their OTC team to find trades. There are also independent OTC desks like Cumberland and B2C2, which specialize in these types of transactions.
Once you've chosen a broker, you'll need to complete Know Your Customer (KYC) and Anti-Money Laundering (AML) verifications. This is similar to creating a bank account or traditional financial transactions. You might find that they are more rigorous and in-depth than regular exchanges. The more you're looking to trade, the tighter regulations get as governments look to reduce the effects of money laundering through cryptocurrency and banking rails.
Once you're verified, you'll be able to start getting quotes through your OTC desk. You can request a quote for a specific trading pair and volume. For example, trading $200,000 USD for BTC or 80,000NGN for USDT stablecoin. Most desks will give you an indicative price before a confirmed quote.
From here, you might engage in a negotiation process between your OTC desk intermediary and other private buyers or sellers. This will allow you to discuss price, payment terms and the settlement timeline. The availability of negotiation does differ from desk to desk; some will allow it, some just offer firm quotes.
Once settled, funds are transferred via the agreed method. The intermediary desk moves crypto into the buyer's wallet and the seller will receive their crypto or fiat into their relevant wallet or bank account.
How is OTC different from traditional exchanges or crypto DEXs?
Now, you might be reading this and thinking, is this any different from a normal crypto exchange? On a normal exchange, you create an order, you select your price and you wait for someone to fill that order.
Well, the difference is that these orders are publicly viewable in order books for the whole market to see and react to. OTC trades are negotiated privately, directly between parties and via an intermediary desk. With a public order, you're revealing your trading strategy to the world. OTC offers complete privacy for your strategy and assets.
The price discovery works differently too. On an exchange, the price is determined by matching orders in the order book. DEXs operate in a similar method but use an automated market maker, an algorithm, for their order books.
With OTC, the price can be negotiated directly between the buyer and seller based on market conditions. For high-volume trades, you're likely to get a better price in the long run.
Communication and customization of the service are also improved. On a normal exchange, there's no direct communication between the buying and selling parties, whereas OTC desks can offer direct negotiation between two parties via an intermediary.
Different OTC Trading Options
Coinbase Prime
North America's most popular cryptocurrency exchange also offers a spread of institutional services. Coinbase Prime is their OTC brokerage platform specifically for institutions. They do hundreds of billions of quarterly institutional trading volume and can even custody 400+ assets for institutions.
Kraken OTC
Kraken is another global exchange with an OTC desk. It offers white-glove service that operates 24/7; One of the reasons it's become the number one OTC desk in Europe with over 35% market share.
Crypto.com
Crypto.com has integrated OTC trading with their broader ecosystem. For large block trades, they offer competitive pricing and fast settlement options directly in a Crypto.com account.
Bitso
Bitso is Latin America's leading crypto platform. Their OTC desk specializes in the local fiat currencies including MXN, IRS, BRL and USD trading pairs. This gives businesses operating in Latin American markets access to large volume crypto trades combined with local settlement options and regional knowledge.
Yellow Card
Yellow Card Commercial is a leading Africa-focused OTC trading desk. It specializes in African fiat currency trading pairs, including NGN, KES and UGX. It's become essential for institutions and high net worth individuals operating across African markets thanks to its local payment integration and settlement options.
B2C2
B2C2 is one of the oldest OTC desks and has a reputation for tight spreads and inbuilt AI pricing. They offer spot trading in the top crypto and fiat currency pairs via an API, combined with bespoke liquidity and even the ability to borrow and lend funds rapidly for added capital efficiency.
Cumberland
Cumberland comes from a legacy finance background and provides deep, dependable liquidity for cryptocurrency for institutional investors in the digital asset space.
Fuze
Fuze’s OTC desk provides institutional-grade execution and a personalized service for trades starting as little as 25,000 USDT. You can get trading in as little as 24 hours.
Rain
Rain is a tailored OTC trading desk. It uses a broker-dealer network and structures private deals for crypto traders using off-exchange pools of liquidity.
Nonco
Nonco specializes in complex structured products and derivatives and is designed as a counterparty specifically for financial institutions and professional investors.
OSL
OSL has a focus on Asia and is based in Hong Kong with a comprehensive suite of institutional brokerage services.
FalconX
FalconX has access to 94% of global digital asset liquidity across more than 400 tokens. It is completely institution-focused with end-to-end white-glove support.
Risks of OTC Crypto
OTC crypto trading has a lot of upsides. Reduced slippage, better rates, bespoke white-glove services… but it does have some inherent risks. Let’s look at the risks of OTC crypto trading:
Counterparty risk
Number one, there's counterparty risk. No exchange will guarantee or insure trades and there is a high reliance on trust and reputation of your intermediary along with your trading partner.
Communication channels
While communication is frequent, it often occurs in messaging apps like WhatsApp, Telegram and chatbots, which can create a documentation challenge for some institutions. With messaging occurring outside of normal channels, OTC crypto trades are not always tied into your traditional payment flow or accounting systems. But it's important to note that OTC trades are still taxable events.
You need to ensure you're collecting the right documentation for your trades. Be aware that authorities are increasingly tightening scrutiny on large crypto and stablecoin trades. So make sure to keep detailed records.
Regulatory concerns
For institutions and high net worth individuals, crypto regulations can be confusing in certain jurisdictions. So before engaging with an OTC trade, it's important to seek legal and financial advice to make sure you stay within geographical regulatory requirements.
Simplify crypto payments with Acctual
If you’re about to start using OTC services for your crypto trading, there’s one crucial piece left to consider. How will you manage your payments and track transactions efficiently?
When the numbers get large, Acctual keeps your funds and transaction data flowing smoothly. You can create professional invoices in seconds to get paid crypto straight into your crypto wallet. Or if you’re not interested in holding crypto, that's easy too. Acctual’s flexible payment options allow you to turn incoming crypto into fiat instantly. Funds go directly into your bank account without the need for a crypto wallet.
Have bills to pay? Acctual can consolidate both crypto and fiat payments in the same place. You get to pay however you want and your bill is then paid to the recipient in the correct format. For example, if you want to pay in NGN but the bill needs to be sent as CNY… then Acctual handles all the conversions for you.
As a large institution, you can use the built-in internal transfer module built specifically for treasury management. It removes the headaches of constant approvals, operational delays and messy tracking. Instead, your team benefits from streamlined fund movements with lightning-fast approvals and a clear record of all transactions. It even works when moving between fiat and stablecoins!
Sound like a useful solution to your fiat/crypto treasury management? Get started with a free account today.
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