Market size
Last three years Over-The-Counter cryptocurrency market keeps on growing in volume and clients amount across the globe according to many reports of brokers and companies involved in the process.
OTC turnover in 2018 amounted to more than 5.471 trillion USD equivalent
1.
Daily volume 2019
OTC Market
$30B+
Crypto Exchanges2
$20B
DEXes3
$2.3B
The research part from Capco
1 Based on reports by Bloomberg, Bravenewcoin, Circle, Statista, CCN and 10+ another sources.
2 Crypto exchanges volume
3 DEX daily volumeWhy OTC broker (instead of a crypto exchange)?
- Lack of liquidity — crypto exchanges have low liquidity. OTC desks are good for pushing through large trade orders searching for market liquidity.
- Price protection, Anonymity — OTC is good for moving large orders which avoids impacting the price, e.g. 1,000 BTC. Order depth will not show up like it does on an exchange.
- No fiat onramp — few crypto exchanges have a fiat onramp (though Binance is working on it and already have some solutions in place in Asia).
- Avoid price ‘slippage’ — price slippage occurs on exchanges when the executed price is different to the expected price.
- Avoid prohibitive crypto exchange limits — the majority of crypto exchanges have prohibitive trading limits. For example, Coinbase limits purchases to $25,000 per day. Kraken only lets you withdraw $2,500 per day and $20,000 per month. Circle imposes withdrawal limit of $3,000 per week.
Who are the main buyers and sellers?
At the moment, the main buyers are hedge funds and the main sellers are miners. In Oct 2018, it was reported in
Reddit Rumours that hedge funds were buying large volumes from miners. The main participants trading crypto OTC are:
- Hedge funds, smaller asset managers, family offices (buyers).
- Miners (sellers).
- Regulated broker-dealers (on account).
- Crypto exchange OTC desks (on account).
What are the main problems?
- Settlement risk — there is no guarantee the asset will be delivered, or cash will be paid. Coin transfer often happens much faster than the wire payment transfer (often by several hours).
- No custody solution — most OTC brokers don’t provide a custody solution (or provide a very limited service), which can increase settlement and operational risk.
- Multi-jurisdictional KYC issues — dealing with countries with poor KYC regulations can be a deal breaker.
- If you execute through an OTC broker you need, for example, to deliver the ETH to the broker. There is no guarantee the brokers client will pay.
- The larger the order the greater the risk of default with multiple counterparties.
- OTC crypto is missing the monitoring and surveillance tools of traditional trading systems.
What we do?
ROX Capital AG team is working on Decentralised Finance technology which brings fully trustless direct asset exchange tools to customers of OTC companies and crypto exchanges.
ROX is designed the platform that helps to build trust between exchange members based on a trustless technology which retains assets control by beneficiaries on any stage of a process.
The system of Smart Contracts provides a simple tool that help participants exchange Proof-of-Funds in seconds without moving funds to a broker or third party escrow until needed amount and price requirements achieved from both sides.
Features
- SaaS Provider for OTC and other Institutionals
- Trustless Smart Contract Network4
- Impersonal Orders with Proof-of-Funds from KYC Verified Members
- Integration with third party OTC desk
- Referral program for Agents and Deal Merge Fee Trustee
- Onchain trustless deals initiate by manager or beneficiary
- Cross-chain5 Trustless DLT System
4 Trustless Network is based on blockchain opportunities, the system provides manager or
beneficiary to setup terms for each deal, including price, referral fee amount, choose exact whitelisted tokens for both sides of exchange, also minimum transaction volume or fix lot for change. The all details are transparent and available in blockchain comments and through the provided interface for both sides.
5 On the first stage we provide Ethereum ERC-20 based MVP which is demonstrate the concept and during the public Beta-test continue working with Bitcoin blockchain integration stability.Two or more OTC brokers can merge any deal, set-up needed fee size and share it through built in partner program.
Time is saved for all market participants — from agreement to transfer receipt both sides could spend less than 1 hour, instead of days or weeks.
Anonymity is protected — large impersonal reliable orders and no needed meetings anymore.
As the majority of brokers execute based on
Request for Quote (RFQ) and
‘Fill or Kill’ (FOK). That’s why we created four types of contracts:
1. FOK with two participants and fix lot order.
2. FOK with two participants and minimum order amount.
3. One side offer can be filled with unlimited transactions from second side and minimum order amount.
4. One side offer can be filled with unlimited transactions from second side with fix lot order.
Contracts can be declined by initiator any time before lot or minimum order amount fulfilment. If declined, all funds returns to senders without any fees. Same as escrow but trustless.Options
ROXY provides:
1. Web app cabinet, where broker prepare a deal in three simple steps: choosing contract type, fill up details (tokens for buyer and seller, price, lot/minimum amount, fee, other additional details) and creates contract with transparent accepted by participants terms.
2. White label integration.
The service is provided under an agreement B2B to a companies authorised to proceed exchanges of crypto assets for their customers according to regulatory agreements in the countries where entities operating.
