What is Bitcoin OTC trading?- For most market participants, buyers and sellers directly place orders in centralized exchanges. However, for investors, the order of trading large amounts of Bitcoin will be very expensive.
- Suppose you have a fund and are trying to buy 1 million dollars worth of bitcoin or have an ICO project trying to sell Bitcoin to get 1 million USD. If you try to place such a large trading order on the trading floor, this order will cause the whole market to fluctuate and you can make a huge loss.
To avoid such scenarios, investors choose OTC trading method.- Instead of placing trades on a regular exchange, OTC transactions are made directly between the two parties. An OTC broker provides trading with liquidity, or find someone ready to trade. Because this happens outside the normal market, the trading volume is hidden and not registered by a trading platform.
-There are two main ways to trade OTC:
- Joint venture broker, a company that acts as an intermediary to connect buyers and sellers. An inter-agency broker will usually charge a fixed fee to the parties.
- An authorized OTC trading company, a company that will act as a direct partner and bear trading risks. Authorized OTC trading companies will charge the same as a joint venture broker or more, based on market demand and the extent to which they can manage risk.
Basic mistakes when trading Bitcoin OTC.You contact many brokers- Suppose one of the brokers you call a joint venture broker. After you call them to ask the price, they will talk to the people they know to find a trading partner. Now the network knows that there is a person who wants to sell. Partners can remove their buying orders from the market, making Bitcoin prices lower, so they can get a more favorable rate.
You let others know your intentions- Even if you only call a single broker to provide details about your transaction, it also gives them enough information to stay ahead of the market and adjust the price. Suppose you call a personal broker and say you want to sell 1,000 BTC in a day. You just revealed your intention and that information can be used against you. The moment you hang up, the broker quickly sells some of their own Bitcoin. If you deal with the broker They can buy Bitcoin from you for a lower price. Even if you trade with another broker, since your 1,000 BTC transaction will make the market go down, the original broker can also buy Bitcoin from the market at a cheaper price. Well, the brokers also have their hands on it because you have revealed information about your transaction.
You buy or sell the entire amount-If you're trying to buy or sell 1,000 OTC BTC, don't make the mistake of trying to cram all the money into a transaction. The rate you get for selling 10 BTC will be much better than the rate you get to sell 10,000 BTC. With a big deal, there is always a risk that the market will fluctuate and prices will plunge. OTC brokers value this risk at the price they provide you. For orders to sell 10,000 BTC at the price of 10,000 USD / BTC, the price increase of 10% could reach millions of USD.
Lessons learnedAlthough Bitcoin OTC trading helps you cover up your investment interests from the market, you absolutely cannot hide that interest, because you are dealing with an active intermediary in the market. When you trade Bitcoin OTC, you need to clearly charge the fees you pay to the broker along with the potential fees you will incur by sharing information with the brokers. Minimize the information you share to minimize manipulation.
P/S:- Hopefully the article will help you, as a newcomer to the forum, I hope my knowledge of this market will help newcomers. Thanks for reading my article
