Learn everything you need to know about trading large amounts of bitcoin over-the-counter using a bitcoin OTC broker.
What is the OTC Market?
A large amount of bitcoin trading occurs on platforms like Binance or Coinbase where the exchanges act as the market makers. They match the buyers (who set the bids) and sellers (who set the asks) on the platform and take a fee for their services.
The OTC market connects buyers and sellers as well, but it does so via bitcoin broker. Bitcoin brokers essentially replace the exchanges as the “market makers”, acting as the new middleman between buyers and sellers.
The OTC market has a niche target that focuses on traders with significant sums of cash who prefer their orders to be filled by one party. The persons seeking a trade will quote prices to their broker, and it’s the job of the OTC broker to connect their client with another trader to complete the transaction.
Buyers and sellers communicate through their bitcoin brokers, which helps them remain anonymous throughout the transaction. The majority of OTC transactions involve large sums of money because OTC bitcoin brokers help wealthy traders avoid “slippage”.
Slippage occurs when a buyer places a large order on an exchange, which is then filled by multiple sell orders that can vary slightly in price. The result is an increase in total fees paid and a variance in the price paid for the asset. Direct transactions via OTC markets ensure a singular transaction at an agreed-upon price between the two parties.
What are Bitcoin OTC Brokers?
The first thing to know about bitcoin brokers is that they are not financial advisors. Financial advisors form relationships with their clients and usually manage funds on the clients’ behalf. In contrast, OTC brokers typically trade per explicit request from clients and per limits/goals previously established.
The key advantage of trading with a Bitcoin broker is the elimination of any slippage. Bitcoin brokers charge a single fee for their service, but they eliminate excess fees charged by major exchanges when making significant digital asset investments.
OTC brokers develop networks of buyers and sellers to ensure each client’s needs are met. When searching for the right Bitcoin OTC Broker, it’s important to find a firm that has an established network. Doing so will improve the odds of finding the right buyer or seller for any type of trade.
In order to trade via an OTC Broker, investors will have to prove their source of funds and net worth to the firm. Therefore, brokers require clients to complete an identity verification process known as KYC (Know Your Customer), which helps prevent identity theft, money laundering, and other types of fraud.
Why Use a Bitcoin Broker?
OTC brokers are not for everyone. The average investor should find everything they need on popular exchanges like Binance or Coinbase, but for larger investors trading over-the-counter makes sense.
Below is a comprehensive list of pros and cons for those investors considering an OTC Bitcoin Broker.
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Best Bitcoin Brokers
Bitcoin Market Journal has researched and analyzed the top bitcoin OTC brokers to help investors identify the firm that is right for them. If you decide that it’s time to make a substantial investment in digital assets, review our list first to learn everything you need to know about what to look for when choosing the right bitcoin broker for you.
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Should You Buy Bitcoin Using an OTC Broker?
Investors who want to reap the benefits of OTC bitcoin brokers should first check the balance in their bank accounts before picking up the phone. Brokers require a certain level of cash or volume to justify the investment. Single exchanges, no matter the size, lack the liquidity necessary to fill massive order blocks.
Exchanges fulfill the needs of the typical investor in the vast majority of cases. They offer hundreds of altcoins with different asset pairings, margin trading, automated investing, stop/limit market orders, and, most importantly, investors can purchase fractional shares of coins.
Answering one simple question will, in most cases, reveal whether or not an investor should pursue OTC Bitcoin Brokerage trades: Does your total purchase amount exceed the limits of traditional digital asset exchanges? If so, then you are better off trading with an OTC broker.
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