What is OTC trading? How to trade OTC safely
OTC
(over-the-counter market) trading is a form of cryptocurrency trading without going through centralized intermediary exchanges such as OKX, Binance, Bybit or decentralized exchanges such as Uniswap, Pancake, Susiswap . Instead, OTC transactions take place directly between buyers and sellers or through OTC brokers or agents. Advantages of OTC trading: Large Orders: OTC trading typically allows investors and institutions to buy and sell large amounts of cryptocurrency without affecting the price on the public market. This helps avoid price slippage when making large transactions on intermediary exchanges.
Transparency: Some OTC transactions allow participating parties to determine prices and trading conditions in advance, then carry out daily transactions to increase transparency and flexibility. Safety: OTC transactions are often carried out directly between parties, helping to avoid cybersecurity risks that intermediary exchanges may face when trading on centralized and decentralized exchanges. central. Ability to Choose Trading Partners: OTC trading participants have the ability to choose their trading partners, which helps optimize trading according to specific requirements.
Disadvantages of OTC trading: Lower Price Efficiency: Buying and selling prices in OTC transactions are often not as competitive as prices on intermediary exchanges. This can result in paying a higher price when buying and receiving a lower price when selling. Potential for Fraud: OTC trading does not have the control of an intermediary exchange, so there is a risk of encountering scams or fraudulent activities if you do not know how to choose a reputable trading party. Legal Risks: OTC trading may involve legal risks, especially if there is no adequate contract or agreement. Regulations and laws may also change over time and by country. Complaint Ability: In the event of a conflict in OTC trading, resolving the conflict may be more difficult than using intermediary exchanges with customer support programs. How to make a secure otc transaction Find someone to trade with: First, you need to find an OTC trading partner who wants to buy or sell cryptocurrency with you. This can be through social networks, your acquaintances, famous KOLs in the cryptocurrency field, forums, or through OTC brokerage services (Cumberland, Genesis Trading, Circle Trade).
Determine transaction terms: You and your trading partner need to discuss and agree on transaction terms, including the amount of cryptocurrency, price, payment method, and execution time. This may require many conversations and agreements. Identity verification (depending on the situation): Depending on the requirements of the two parties, you may need to perform identity verification for both parties to ensure the integrity of the transaction and avoid money laundering. Prepare a contract or memorandum of agreement: Once an agreement is reached, you should draw up a contract or memorandum of agreement documenting all the terms and conditions of the transaction. This ensures clarity and accuracy and can be used in the event of a dispute. Make payment and deliver cryptocurrency: Make payment based on your agreement, and once payment is confirmed, you can transfer cryptocurrency to your trading partner.
Check and complete the transaction: After payment and electronic money transfer, check all information to ensure the transaction is completed successfully and in accordance with the agreed terms. Safe asset storage: Safely store cryptocurrencies after the transaction is completed. This may include storing it in a cold wallet to ensure the security of the assets. Tax filing (depending on the situation): Depending on your local tax regulations, you may need to report your cryptocurrency transactions to tax authorities.
When to use OTC trading You want to buy/sell a large amount of cryptocurrency but you cannot influence the price. The amount of cryptocurrency liquidity you are holding is poor. When you want complete control over your trading process without having to go through an intermediary exchange. When you are especially concerned about protecting your privacy and do not want your personal and transaction information to be disclosed. Companies organize transactions with each other.
