What Is an Over-the-Counter (OTC) Crypto Desk?

Main points

• Over-the-counter (OTC) cryptocurrency transactions are made directly between two parties without the mediation of a third-party exchange.

• CoinFlip Preferred is CoinFlip’s OTC experience for peer-to-peer transactions, transparent fees, and guided client ownership over the investment journey with the help of a certified account manager.

How does an over-the-counter (OTC) desk work?

When it comes to financial markets, there are typically two ways to go about transacting. The first one is through an exchange. In traditional financial markets, third-party exchanges such as the New York Stock Exchange or Nasdaq help negotiate trades between buyers and sellers. Traders share the prices they are willing to sell, and buyers share the prices they want to buy. When these requests overlap, the exchange facilitates the trade.

The second way is over-the-counter or OTC. Rather than using an intermediary to facilitate transactions, OTC buy/sell/swaps happen directly between two parties, with one of those parties typically being an OTC service. OTC transactions tend to be more discreet, and as such, is a preferred choice for significant volume transactions, compared to exchanges.  

Why use a cryptocurrency OTC desk over an exchange?

Crypto exchanges are the most common option for those entering the crypto market. Still, OTC desk services offer advantages that that an exchange cannot.

One of the foundational principles behind Bitcoin and other cryptocurrencies is their peer-to-peer nature. Cryptocurrencies were invented to allow people to make transactions directly without oversight from third parties such as banks. Cryptocurrency exchanges act as intermediaries between crypto buyers and sellers, adding a layer of centralized control over crypto transactions and deviating from the true intent of crypto. OTC crypto desks stay true to the fundamental tenets of crypto by facilitating direct, peer-to-peer transactions.

Because OTC crypto conversions are direct, clients always have complete ownership of their crypto assets throughout the entire transaction. Purchases, sells, and swaps are made directly to and from a personal wallet. Alternatively, when using an exchange, crypto assets are technically no longer client-owned and are in the custody of the exchange. If the exchange is hacked or compromised in some way, the crypto could be lost.

While fund custody and decentralization are important, many investors are only interested in end-of-day profit, and here OTC offers another advantage. Many exchanges make money by capturing the difference in buy and sell rates – which is called the spread. It’s difficult to know exactly how much money an investor loses to the spread, but OTC desks generally feature up-front pricing to allow investors a steady rate that they can factor into their budgets. OTC fees can be lower than the amount forfeited through the exchange’s spread, and this is especially true with higher volumes. To learn more about this, check out our article Beware the Hidden Fees. 

How do OTC crypto transactions work?

Before OTC transactions can occur, some regulatory procedures must be followed, meaning forms on the website must be filled out. After that, transactions generally begin with a phone call or client portal login. The amount of cryptocurrency to buy, sell, or swap gets outlined during this step.

Next, submit the funds for the trade via wire transfer or ACH.

After the OTC desk receives the funds, it initiates the cryptocurrency deposit directly into the client’s crypto wallet. This last step might take a few minutes or a few hours, depending on network traffic and the type of currency being exchanged.

What is CoinFlip Preferred?

CoinFlip Preferred is CoinFlip’s OTC experience that connects clients to PlannerDAO-certified digital asset experts to help them through the onboarding process and answer questions about wallets, investing strategies, web3, or anything else. Our team is devoted to making sure clients always get competitive prices and avoid the unnecessary or hidden fees charged by our competitors.

Unlike other crypto OTC services that require minimum exchanges of twenty BTC or higher, CoinFlip Preferred has no limits on the amount clients can transact with, allowing novices and seasoned institutions to enjoy the benefits of OTC crypto investing at whatever price point they feel comfortable.

In addition to facilitating crypto purchases and sales through direct bank wire transfer or ACH, CoinFlip Preferred has swap abilities, which allows clients to exchange one cryptocurrency for another without trading for fiat currency first. Should there ever be a hiccup, CoinFlip Preferred clients have access to CoinFlip’s award-winning 24/7 customer support.

Register for CoinFlip Preferred today to start making OTC transactions with one of the leading names in the crypto space.