For many people, the first thing that pops into their minds when the term 'over the counter' is pronounced is medicine. Yes, easy to access medication. But what exactly is Over the Counter (OTC) used in the world of cryptocurrency trading?
This article covers everything you need to know about OTC in crypto trading. Take a look at how it works.
With the rapid evolution of crypto markets, new opportunities have opened up for big and small players alike. OTC is just a fancy way of saying 'decentralized' trading in crypto markets, which involves orders that are not listed in the public order books.
How it Works: Clients make transactions with each other through a smart broker without anyone else detecting the transactions.
Being a very innovative way to make cryptocurrency transactions, companies and OTC markets use a global decentralized network system to avail digital tokens on their platforms. The system then automatically proceeds to match buyers and sellers, but depends on their specific requirements. Other sites will allow over-the-counter trading in exchange for local currency.
OTC trading sites are obligated to offer their buyers and sellers recommendations on trading prices, but which may be subject to variations due to different demand and supply forces. Before proceeding to trade, it is worth paying keen attention to the prices listed on the site. This will enable you to get a rough idea on what to expect in terms of profits after trading.
Benefits of OTC Trading
The benefits that OTC trading brings to investors and states cannot be over emphasized. For states and governments, OTC helps to keep the economy going, especially if the government has destroyed its economy through hyper inflated currency.
The major beneficiaries of this unique trading system are crafty traders who cash in on arbitrage to generate huge perks from the trade. What they do is buy cheap tokens via an over-the-counter trading system in one location and then sell them in another location to cash in on that difference. And as is the norm, they're able to secure huge profits.
The second benefit of OTC trading is that it offers its players a completely open marketplace that is free from interference by middlemen. This is presumably good because parties enjoy a free flow of trade.
Regulation of OTC Trading in Cryptocurrency
Obviously, any 'strange' trade must attract the attention of authorities in a country. While crafty businesses continue to rake in huge benefits from crypto currency trading, authorities have on the other hand lacked methods to regulate trade effectively. Being an associate of crypto trading, OTC trading is even the worst nightmare for central banks because it is carried out without leaving any official record.
Despite the fact that OTC trading is providing untested opportunities to entrepreneurial investors and dreamers, it is worth noting that players should play their cards well in order for them to secure amazing profits. Some deals become a success while others go sour. In the crypto context, the closing bell is that Over The Counter trading is a risk worth taking.