Bitcoin Forum

http://uk.businessinsider.com/circle-trade-ups-bitcoin-trade-minimum-2018-4?r=US&IR=T

Despite the occasional quietness on the exchanges, this is certainly a sign that things are rumbling away in the background. Circle are reporting trades above $100 million.

I'd love to hear more about the OTC markets. They're never, ever mentioned on this forum but it's where the epic sales take place.

I must say I don't really understand how all this works. I'm familiar with retail exchanges, and coinmarketcap, and I usually check it's price there. Everything seems to be interlinked, and although BTC runs on a free market, I do believe that exchanges have bots to maintain the price leveled between them. No saying they are manipulating the market, but they need to be running bots in order to keep a very small variance of prices between them. Kind of like bookies and odds. You rarely see a big difference of odds between bookies.

So my question is, how does these OTC markets play a role in all of this. I'm assuming they are buying and selling crypto at the same price we are, but how does all of this works?

It's basically a very fancy and large scale Localbitcoins. Exchanges set the market price. OTC markets are nowhere near exchanges and OTC is the most practical way you can buy or sell seriously large amounts without cratering the market. They never register on the market, it's a private agreement between buyer and seller brokered by the OTC company.

If you had 2000 BTC to sell it would be hopeless on an exchange. An OTC trader will have a list of potential buyers they can call who'll take it off your hands and no one else is any the wiser.

You may not achieve market price. It's totally down to what's decided by all parties, but you will eliminate slippage. As for market effects, some think it removes a lot of buying power, but it also removes selling power and these people wouldn't consider exchange trading in the first place.

I think I get it. It's like I decided to trade bitcoins with you. I could transfer the coins to your address and you would transfer some fiat to me. We would agree on a price, that could be the market price or something completely different. Is that it?

It still puzzles me a bit, because I have no idea on how they are valuing bitcoin. It's like a complete different market apparently, and since they have a lot of money, I guess that a lot of bitcoins are being traded between them. Also, shouldn't they be regulated. I'm assuming those trades need to be registered, but since there is no one setting the price for BTC, since it's a free market, they could end up doing whatever they want. I things happen like this, I have no idea if this is good or bad for BTC, but it doesn't look that good.

Yep. Pretty much. The OTC broker is the middle man and acts as the facilitator and either the escrow, or thoroughly vets both parties.

The only way you can get an idea of price is by checking the exchanges, but of course it's totally up to the people doing the deal to decide the price they'll proceed on. It could be thousands less per coin for all we know. If that works for both then they'll go for it. No one else is going to know or care.

The big operations probably aren't subject to specific regulation for this space, but they often have parent companies who operate in fully regulated areas.

The only possible derogatory effect on Bitcoin is removing buying power from the open market, but it also removes selling so the effect is likely to be neutral.