Today we have news that Japanese crypto exchange Coincheck is going to open up an over-the-counter market for cryptocurrencies open weekdays 10:00-15:00 (JST) for big investors to trade OTC.
“Coincheck has written that the new service will allow large-scale institutional players to buy and sell large amounts of crypto swiftly, and it has also indicated that it will consider adding OTC support for cryptocurrencies other than Bitcoin in future,” writes Cointelegraph’s Marie Huillet.
Why is this important?
First, investors have all sorts of choices in getting hold of cryptocurrencies through markets and exchanges.
Although we don’t yet have a Bitcoin exchange traded fund in the United States, investors can easily purchase Bitcoin or other crypto coins that are tracked on a U.S. exchange.
For example, the value of Bitcoin right now hovers around $4000.
However, over the counter deals are a bit different.
In these transactions, private parties simply agree on a negotiated trade together.
That means the OTC value might not track the exchange value. However, the OTC gives companies and other investors ways to deal directly and not through the centralized market-making power of an exchange.
Here’s some other commentary on how OTC might be useful from Finder:
“If you’re a trader who wants to purchase a large amount of cryptocurrency, buying coins or tokens through a traditional exchange exposes you to several problems. Not only can slippage greatly increase the cost of a trade, but you’ll also need to deal with the risks of hacking and theft that come with trading on an ordinary exchange. This is where over-the-counter (OTC) trading comes in. OTC trading is a service available to high-volume traders, meaning it’s only available to certain individuals or groups. This guide will help you decide whether OTC trading is the right option for you, and what to look out for when deciding on an OTC solution.”
On the other hand, most smaller investors shy away from OTC trades because they want the stability of the market, and they benefit from the liquidity of being able to buy and sell easily on exchanges without the red tape that may be associated with an OTC deal.
Here’s a tip for investors who want to understand what’s happening with crypto right now. Take a look at these over the counter trades. See what big institutions are doing and in what ways they trade crypto coins back and forth privately. You could spy some indicators of future markets.