Why OTC crypto trading is better than CEX and DEX

In this article:

Why is it profitable to trade crypto on the OTC market instead of CEX?
Why is it better to trade crypto on the OTC market instead of DEX?
Why is there a demand for the crypto OTC market?
How crypto OTC transactions are carried out
How to carry out transactions on a decentralized OTC platform
What is the most profitable way to conduct OTC transactions?

What is Crypto OTC?

Crypto OTC is a trading tool that comes from traditional stock exchanges. OTC stands for Over-the-Counter. The term appeared at the end of the 19th century in connection with the practice of buying shares from bank counters or, in general, on the street near the stock exchange.

This type of transaction is not reflected in the market, as it is carried out directly between the seller and the buyer, bypassing the exchange. Thus, any large transaction carried out using a method such as crypto OTC does not in any way affect the price of the assets involved in the transaction.

Why is it profitable to trade crypto on the OTC market instead of CEX?

The main problem with almost any cryptocurrency asset is that it has insufficient liquidity. Almost any large trade can greatly affect the rate. Consider a CEX example, i.e. Centralized crypto Exchange.

To conduct a large transaction on CEX you usually need to make many small transactions, or use pending (limit orders). Moreover, the rate may vary at any moment, and the limit order simply will not be executed within the time period required by the offer maker.

Liquidity and volatility at the time of the transaction determine the number of transfers required and the range of rates. Thus, the sale of a large volume of a cryptocurrency asset on the exchange will begin to put pressure on the asset price actually devaluing it.

This hits both sellers and buyers. Starting the sale of a large volume of an asset at a high price, the seller ends up selling a large lot at a price much lower than the initial one.

This is what we call the slippage effect.

One of the main advantages of dOTC Marsbase is that liquidity for large trades is concentrated in one place, and not scattered across a dozen exchanges. At the same time, the choice is not limited to a short list of currencies, as in conventional CEX.

Why is it better to trade crypto on the OTC market instead of DEX?

The situation on the DEX, i.e. decentralized exchanges, is a little different from the previous one. To sell the entire volume, you need to use several DEX exchanges or aggregators.

At the same time, there is even less liquidity here, since DeFi projects are younger than such oldies as bitcoin or ether. Selling a large volume of low-liquid DeFi tokens often leads to large losses due to the impact on the price or the so-called price impact.

So, why do market participants choose crypto OTC trading?

To avoid slippage and price impact. OTC crypto trading is an excellent tool for selling a large volume of a cryptocurrency asset. OTC trades are conducted outside the main market (CEX and DEX) and do not affect the asset price in any way.

Thus, the seller can sell the entire volume of his asset at a profitable price for himself and in one transaction. Transactions through crypto OTC desks have a number of advantages, including price stability, execution speed, as well as security and privacy.

There is another option. Often, even before the launch of a promising and large-scale project, some investors find out about it and want to buy as many assets as possible at the lowest price. There is often no free trade at this stage yet, that is, trades are open only to very large investors.

Why is there a demand for the crypto OTC market?

For a long time in history of the world of crypto the OTC market has been only open to big players and whales. However a number of factors have influenced the recent surge in interest and wider adoption of OTC in the crypto industry.

Large trades on exchanges can only be made with full KYC, which is an obstacle for many users. Therefore, even if desired, large deals on CEX are not available for them. All they have to do is go to the services for OTC trading, which actively occupy a market niche with orders of about $ 50–100k and above.

But, now, even with $ 3,000, you can participate in an OTC deal with great profit for yourself. Thanks to the emergence of DeFi OTC desks such as MarsBase you can now obtain a part of a large lot with a big discount.

How crypto OTC transactions are carried out

Most often, transactions follow three scenarios:

1. You trust your assets to a trader who sells them through exchanges, depending on the volume.
2. A crypto OTC desk (a company engaged in over-the-counter trading) takes the responsibility to sell a large volume of assets, names a price for it, and conducts a transaction from its balance.
3. A large buyer and a seller meet on the same website with an intention to exchange an asset at a price above or below the market.

As for the crypto world, OTC crypto trading primarily interested those who are ready to sell large volumes of coins — successful miners and crypto investors.

Marsbase opens access to OTC trading for any market participant, be it crypto whales or retail investors. Thanks to the unique mode of fractional transactions (PART DEALS), anyone can place an offer that interests him.

How to carry out transactions on a decentralized OTC platform

There are several advantages of dOTC:

• Anonymity

Marsbase does not require verification or KYC. You just connect your wallet to the platform.

• Reliability

The platform guarantees the safety of transactions, since they all go through reliable smart contracts.

• The ability to exchange any assets

Unlike conventional crypto OTC desks, Telegram channels, OTC managers and exchanges, transactions on Marsbase are completely anonymous. This allows you to buy and sell high-risk, high-return assets that are outside the scope of regulation.

• The ability to trade one lot with many participantsl

A large token holder can sell their asset not to one or several buyers at a discount, but to all users of the platform at once.

For example, if you need to sell a certain amount of coins for 1 million dollars, you can find 10 buyers at $100k (which is not so easy).

Or you can use the Marsbase dOTC desk instead, where you will find 5,000 buyers and sell the asset to them for $200 each.

• Possibility to take part in PART deals.

The buyer of the asset has the opportunity to buy the asset at a large discount in relation to the market.

What is the most profitable way to conduct OTC transactions?

There are several options for conducting a crypto OTC transaction:

1. A large seller can entrust his assets to a trader who will sell them on several exchanges. Of course, this method has a big drawback — you need to completely trust the trader and the exchanges, in fact, giving them your assets.
2. A large amount of crypto can be sold through the OTC desk. In this case, the service assumes all risks, conducting the entire transaction from its balance. But you won’t be able to sell online without a huge discount and high commission for this service.
3. A large buyer and a seller meet on the Defi OTC platform with an intention to exchange an asset at a price above or below the market. This is a transaction with the lowest risk and acceptable discounts for the seller.

Today there is only one dOTC platform — MarsBase. You can learn more about it in the following articles and join the community to participate in ambassador and referral programs.