If you’re a trader looking to buy a significant amount of cryptocurrencies, you must be aware that buying coins or tokens on a regular exchange comes with some drawbacks. Slippage, for example, can lead to the high cost of a trade, and you’ll also have to cope with the threats of hacking and theft that come with trading on a regular exchange.
Over-the-counter (OTC) trading comes into play here. OTC trading is a high-volume trading service that is exclusively offered to a select few persons or organisations. This guide will enable you to determine whether OTC trading is a suitable alternative for you, as well as the best Australian OTC Brokers.
What is OTC trading?
OTC is a type of crypto trading that happens outside the digital currency exchanges. These trades are backed by many large-scale traders and are utilised mainly by private wealth managers, hedge funds, and high-net-worth individuals.
OTC trades can be facilitated in various ways, for example:
- Via brokers—Brokers who are specialised in large transactions are increasingly handling OTC trades. ItBit and HiveEx.com are two examples of OTC brokers. These platforms provide a customised service to assist high-volume traders in executing large block deals and avoiding slippage by allowing them to access funds through liquidity providers who hold significant amounts of cryptocurrency.
- Through chat rooms—The first big OTC bitcoin trading occurred in an IRC chatroom called #bitcoin-otc. This trading network is hosted on several IRC channels and allows traders to conduct peer-to-peer transactions.
- Using ATMs—Customers can use Bitcoin ATMs to exchange their fiat currency for digital currencies without going through an internet exchange.
How OTC Transactions Work
Finding a counterparty for a trade is the first stage in any OTC transaction. You can do this in a chat room like the #bitcoin-otc network, but it’s frequently done via an OTC brokering platform.
Negotiating the conditions of the trade is the next phase. If you want to purchase BTC, for example, you need to include the following information:
- The amount you intend to purchase
- The time you want to trade
- Your preferred price
The seller will react with an offer price for the transaction, typically expressed as a percentage over the best available price on a leading exchange—for example, Exchange ABC + 1%. Of course, the actual bargaining process will differ depending on whether you’re the buyer or the seller, the channel you’re using to arrange the deal, the transaction’s size, and whether you have any power.
After agreeing on the price, the buyer sends the seller a bank transfer to pay the purchase price, and in return, the seller sends the buyer the appropriate amount of crypto coins or tokens. Depending on where both parties involved in the deal live, KYC (Know Your Customer) due diligence on each other may be required to ensure that they meet legal standards.
Why Should I Choose OTC Trading Instead of Regular Exchange Platforms
While there are tons of traditional exchanges offering straightforward fiat-to-crypto transactions, most of the large traders prefer going OTC for various reasons such as:
- Better prices—The traditional (on-exchange) cryptocurrency market is still in its early stages, and exchange liquidity may not always be sufficient to handle large trades. As a result, placing a large transaction on a traditional exchange could cause slippage, which is when the price of a cryptocurrency moves in an unfavourable direction before your trade is finished. Large orders may be split into multiple smaller orders instead of being filled for a single price, with the cost of each order generally increasing. OTC trading allows traders to place a single buy order at a single price.
- Avoid low trading limits—Most traditional exchanges have the maximum amount a user can trade each day and the total amount you can withdraw from an account in 24 hours. Such restrictions can also differ depending on the transaction methods utilized, the amount of account verification completed, and the length of time a user has been trading on the site. They may be insufficient to suit the needs of large-scale traders in many circumstances.
- Quicker trading times—Large trades on a traditional exchange can take days to complete depending on the liquidity available. You can achieve faster processing times by using OTC trading.
- Use a trusted broker—There have been countless instances of traditional cryptocurrency exchanges being targeted by hackers and falling prey to them all too regularly. You can prevent this risk by placing OTC trades through a reputable broker.
Best Australian OTC Brokers
1. Swyftx—Highly Recommended
Swyftx is an Australian cryptocurrency platform where customers can purchase Bitcoin, Ethereum, XRP, and over 280 digital assets. High-net-worth individuals, SMSFS, and institutional clients who need to fill orders that could potentially upset market pricing can use its OTC trading services.
Swyftx is an OTC broker that offers one of the most diverse cryptocurrency portfolios, with over 270 different coins to choose from. Swyftx can execute massive OTC trades on all of its coins with small spreads thanks to its connection to a global liquidity provider network.
Swyftx, like other of the leading Australian OTC crypto brokers, has a high level of security and has not had a security breach since its inception in 2017. It’s registered with AUSTRAC to combat money laundering and terrorism financing and uses two-factor authentication, biometric authentication, and compromised password detection.
The CoinSpot Trading Desk can help you with all elements of incorporating cryptocurrency into your portfolio, whether you’re new to Bitcoin and cryptocurrencies or a veteran trader. This covers high-value deposit and withdrawal facilitation, blockchain training and education, best-practice blockchain security processes, and onboarding of Self Managed Super Funds and Business Accounts.
CoinSpot OTC (Over-The-Counter) offers direct access to a Professional Trading Broker that helps you with all components of adding bitcoin to your portfolio. Lock-in pricing will help you avoid slippage and reduce the risks that come with high-volume trading. With new coins and tokens being introduced all the time, the CoinSpot Trading desk has more cryptocurrencies than any other Australian crypto exchange.
CoinJar is a cryptocurrency exchange that allows users to purchase, sell, spend, and store digital assets. The exchange has won numerous awards and is supported by venture capital firms. In addition to desktop access and the CoinJar Card, it has mobile applications. CoinJar’s mission is to create useful applications for digital currencies.
Having been launched in 2013, CoinJar boasts of being one of the world’s oldest digital currency exchanges. More than 500,000 CoinJar users have traded more than £750 million on the platform. With more than £50 million in assets under its control, the exchange is quite large. Asher Tan and Ryan Zhou, the co-founders, are currently the CEO and COO, respectively.