Crypto OTC trading is a process of trading cryptocurrencies directly between two parties, “over the counter”.
First off, the minimum limits for OTC are not that high anymore these days. You don’t need to buy the full mined block either.
There are several reasons why you might want to trade cryptocurrency OTC. For one, you get better prices than you would on the spot market.
But in case you already know that, jump right to the lists of crypto OTC providers:
- Exchange-based OTC for spot-like trading
- Independent OTC for best deals cashing out
- P2P as OTC for trading small amounts
OTC is better deal for both sides
The original Bitcoin OTC desks were based around mining companies who had access to loads of BTC.
It was convenient for them to sell bulk to avoid market slippage and exchange fees - for which reason it was convenient for their counter party as well.
The total costs of purchasing BTC ended up being lower for the buyer, and the total profits higher for the seller, as exchange fees accumulate with large trades.
Today, most OTC providers are trading desks on behalf of crypto exchanges or independent financial institutions.
They get fiat and crypto liquidity from their own exchange activities and from partners - institutions and individuals. They do sometimes partner with miners and generally the model is still based on getting an asset cheaper and selling it with a margin that still makes it a better deal for both parties.
How does an OTC trade look like
When you trade OTC, you get quotes directly with the other party rather than from the order book of the exchange. The biggest advantage is that you know upfront how much the total transaction will cost you, and that the transaction is done without delays.
These days that usually happens in a Telegram chat. You’ll be in a private chat with just you and a few trading desk operators.
When you’re interested in making a trade, ask for quote. Some OTC will require you to name your side, e.g. quote to sell 10 BTC. But if you can, leave that out and request a quote for both sides.
The operator will name the total price for the transaction. That is the final total value that you will pay. You can reject or agree to execute that trade.
Once you agree on a quote with the counter party, your order is processed immediately. If you were selling, your fiat should be wired within a few hours. If you were buying, you need to wire the money within a time window - usually 24 hours.
Alternatively, exchange-based OTC desks can use your exchange account balance instead. That makes it pretty much a spot trade, except with lower fees and no slippage.
Fee, Slippage and reactive traders on open markets
On the open market, you either have to use market orders to get filled ASAP, but that is really expensive, especially if you have no traded volume on the platform and therefore don’t qualify for fee discounts. The only other alternative is to do limit orders and wait until they are filled…
…If ever. On smaller markets, the presence of a whale alone can cause a rally, which will move the market away from your limit orders and you will have to buy higher.
When you trade on an exchange, your trades are public knowledge through the order book. So, you’re broadcasting the information that somebody is buying huge amounts of crypto. Active traders will notice even hidden orders, not to mention that again - they are expensive.
However, when you trade OTC, your trades are not publicly visible on the exchange books. The volume you bought will still be visible in on-chain data, but it will look like a generic transaction or an internal movement. With OTC you are not trading the live offers from the books, but liquidity that was purchased before that, at a convenient price.
Another reason to trade OTC is for privacy. During many of the episodes of the China bans crypto soap opera, larger Chinese traders relied on OTC trades and smaller ones on P2P trades. P2P marketplaces run on the same principle as OTC, except they focus on small traded values.
Exchange-based Crypto OTC desks
If you’re looking to try OTC, the fastest way to start is to use a regulated custodial exchange.
Preferably one that you already use, and maybe one that is not infamous for charging outrageous fees (hello, Coinbase).
Most regulated exchanges offer an OTC trading desk where you can buy and sell cryptocurrencies directly with less costs. The fees for OTC services are typically zero or lower than if you use the open order book on the same exchange.
Another advantage of using an exchange-based OTC is that you don’t need to pass the KYC/AML checks all over again because you are already verified on the exchange. Some exchanges will ask for additional documents or selfies, though.
Last point can be both advantage and disadvantage: With exchange OTC desks, you get to use your exchange account balance, not necessarily your bank account. Holding money on the exchange brings additional risk, but it also means that your OTC trades will settle faster if there are no banks involved.
Simply put - you will not get to make two intraday OTC trades if you need to wait for the fiat transaction to clear in your bank.
These are the top three of the exchange-based OTC desks for bitcoin and altcoins:
Independent Reserve OTC desk - min. 50 000 USD
The Independent Reserve OTC trading desk has the lowest minimum size I was about to find.
Trades are settled in the same day in AUD, USD, NZD and SGD - they do process even international wires really fast.
Another advantage at Independent Reserve OTC is that you get to access alt coin markets that are not yet accessible through the exchange interface. Those include SOL, Terra, AVAX and more, as well as their crypto-to-crypto ratios. (Ratios are not available on the Independent Reserve exchange at all, other than at OTC.)
One potential disadvantage is that it is an Australian exchange and they do focus on the APAC geo. You won’t get a live agent outside of the 9-5 work day in Sydney time zone.
Another drawback is that trading fees follow a similar system as on the exchange - from 0.5% down to 0.02%, with volume discounts starting first at 100k. You will get a slightly better price than from the order book, though.
Costs of a 100k trade: 500 USD exchange / 480 USD OTC
Kraken OTC desk - min. 100 000 USD
Kraken OTC has higher minimum notional size but as a service it is more competitive than Independent Reserve. In 2020 the Kraken OTC desk already had 11 traders spread across Asia, North America and Europe, which means they trade and settle 24/7, no matter where you live.
You need to verify to level 3 on the exchange to access OTC at Kraken, but after that you can choose to use your exchange balance to trade OTC, or to pay off your OTC trades from your bank account or a self-hosted crypto wallet. The option to use your exchange funds makes it possible to make trades more often, even though the OTC desk is meant for less frequent traders.
If you trade from sources outside of Kraken, Kraken OTC requires you to settle your side within 24 hours. There are no lines of credit.
Trading at Kraken OTC happens via Telegram, Skype or Signal and on asking for a quote, you are given the entire value of the trade.
No fees get added to the quote, which makes OTC way cheaper than trading on the order book.
Costs of a 100k trade: 160-260 USD exchange / 0 USD OTC
FTX.com OTC desk - min. 100 000 USD
FTX International runs an OTC system which makes it possible to trade OTC even using the API.
The OTC setup on FTX is similar to Kraken’s in that your exchange and OTC accounts are tied together and you can source your trades from your exchange balance.
Again, this makes it possible to trade OTC more often (or even programatically), even though the OTC desk is meant for less frequent traders who do big volumes.
FTX charges no fees on OTC trading, whether from external sources or using your wallet - all costs are built into the quote you get. There is no lending system for OTC, but large entities can request a line of credit.
FTX does charge a withdrawal fee of 0.1% on fiat and stablecoins in case of new OTC traders.
Costs of a 100k trade: 20-70 USD exchange / 0 USD OTC
Independent Crypto OTC desks
The oldest and original OTC services were bulk deals done directly with bitcoin mining companies. Some of the business from the old days are still running OTC desks, even if they might no longer mine Bitcoin themselves.
Independent OTC desks tend to be less accessible to individuals though, and have higher minimum order sizes for OTC. That’s why they typically trade with exchanges, miners and large service providers.
That’s not the case for all of them, though, and you might expect a better quote from them than from an exchange OTC desk. Also, independent trading firms usually offer OTC derivative products as well.
You will not be able to trade as often - independent desks do not store your assets like exchanges do. You need to trade from your bank accounts and self-hosted wallets if you want to do independent OTC.
For that reason, the OTC desk will require a full KYC including proofs of sources of income and your professional CV to determine whether they want to trade with you.
A good OTC desk will also execute a smaller test transaction to see if your bank will let you transfer money to the desk without any hiccups.
Here’s what a B2C2 rep said on Reddit:
There are a number of benefits. You don’t have to move money onto the platform to trade, giving you more clarity on the price you’ll be paying. If our prices aren’t competitive, you don’t trade, you don’t have funds tied up, and you take on no couterparty risk. There’s no slippage, deposit/withdrawal fees (0.1%), no trading fees (0.1-0.2%). And yes, otc dealers can quite regularly beat the prices you’d get on the exchange.
Independent OTC desks ordered by lowest minimum settlement value:
B2C2 - min. 50 000 USD
B2C2 is a London-based company authorised and regulated by the UK’s Financial Conduct Authority. They have three trading offices - London, New Jersey and Tokyo to be available 24/7 for a global client base.
The do not work with individual retail traders but they will serve you if you trade cryptocurrency on behalf of a company (which is now easily done in some European countries).
B2C2 trades BTC, ETH, LTC, BCH, XRP, EOS, DOT, UST, LNK & USDC in fiat pairs.
The main advantage at B2C2 is obviously that the minimum settlement is low. They say that this is possible as they do electronic OTC. However, they will look at your aggregate volumes before they give you a quote. As a more established client you may expect better conditions.
B2C2 does not explicitly offer a line of credit, but their settlement terms are negotiable. This means that even though you trade from external sources, you might not be required to settle your side within 24 hours.
Cumberland Mining - min. 100 000 USD
Cumberland Mining trades with both individuals and companies who complete the full KYC. The KYC requirements are nothing over the top - just your personal information and source of funds.
Main markets traded are BTC and ETH, but they do have more assets available.
Cumberland Mining charges no fees, the quote you are given is influenced by supply/demand dynamics on the market and the company’s own position on the market.
OTC trading happens either via the usual Skype or chat messaging app, or programatically via an API.
Genesis Trading - min. 250 000 USD
Genesis Trading is available to “to select qualified institutional investors and accredited individuals”.
In their KYC process they want to verify that you own more than 10 MM USD worth of fiat or crypto.
In addition to OTC trades, Genesis Trading offers lending and borrowing services of at least 100 BTC, 1 000 ETH or 2 MM USD.
P2P as OTC
One exchange that didn’t make it to the list of exchange-based OTC desks is Bitfinex. Bitfinex does offer an OTC desk to verified users, the minimal transaction size is 100 000 USD and there is no fee added to the quote.
Bitfinex is not exactly known for stable banking routes, and so they didn’t make it to the list. But they do offer an interesting feature: They let you bypass the Bitfinex brokerage and trade directly with another OTC trader, as long as you know that trader’s OTC nickname.
The limits for these P2P trades are low (only 50 USD) but you get charged a flat fee of 0.1%.
Still, 0.1% is the taker fee you get on Bitfinex open market without a volume discount. That means that with P2P you get to have a maker trade for the price of a taker trade.
There is a cap of 10% over the market rate for P2P quotes.
Traders from certain countries always prefer a true P2P marketplace, which for many years was LocalBitcoins. That place started requiring a site-wide KYC, which means a lot of people left.
The only alternative since then are LocalCryptos, formerly an ETH market that now also trades BTC, LTC and other big cryptos. LocalCryptos is a zero-knowledge dApp, which means its operators don’t know anything about the people who trade there.
Quotes are not capped in any way, if you want to trade fast, it might get very expensive.
The final word is a word of caution.
You can also find OTC services on various forums and social media. Be careful when dealing with strangers - there are a lot of scams out there, and the experiences shared on Reddit are pretty clear about that: “(…) with a real desk, it was smooth. with a third party otc service to connect people it was pretty rickity.”