Is Crypto Market’s Secret Driving Force Over the Counter (OTC) Bitcoin Trading? TABB Group Says Yes

It’s almost impossible to determine what exactly drives bitcoin’s price. There are mentions of peer to peer purchases, nascent technologies, and regulations. But all of these combined, aren’t enough to drive its price as it is.

There are far too many less obvious factors at play. One of these is over the counter (OTC) transactions. Estimates by TABB group show that the volume of the cryptocurrency’s over the counter transactions is about $12 billion per day.

That’s $1 billion more than the $11 billion from online transactions. That’s a huge amount. But because these transactions are done offline through people meeting face to face or through a local broker, most entities just forget them.

According to Monica Summerville, an employee with the company,

“Our reports are based on interviews and with participants in markets, cover more than BTC and keep in mind that not all transactions show up on public blockchains as many venues omnibus accounts so only net changes to their positions will be written to public blockchain.”

The report from TABB Group has proven that bitcoin transactions may be happening at unprecedented levels… levels that we haven’t even begun to think of.

Why Is Over The Counter Trading So Popular?

For starters, this is the favorite bitcoin trading avenue utilized by the big money investors aka whales. These are entities that have huge quantities of bitcoin in the crypto portfolios.

They’re usually in the form of hedge fund managers, HNIs, private wealth managers and people/companies who are in control of huge investment funds.

This makes sense because brokers help prevent incidents like price drops by “locking them in” at a particular price. This way, they can get their bitcoins at a pre-agreed price. More, there’s a limit to how much can be traded on an exchange at every point in time.

This is both a time and liquidity issue, and one that many exchanges are trying to resolve. Most exchanges cannot handle high volume transactions like brokers do.

For instance, let’s say a private wealth entity wants to sell 200 BTC through a popular cryptocurrency exchange like Binance. While he’s waiting for his order to go through, the price drops.

If the entity really wants to sell, they would have to settle for that price or wait till another time. However, with a broker, a price dip doesn’t affect his selling the coins. Thanks to his access to liquidity providers, he can quickly fill that order and have the tokens sold in a very short time.

The second benefit is that the trading fees and commissions are usually lower than those offered by exchanges. The seller can always negotiate with the broker and reach an agreement about commissions and associated trading fees, unlike exchange fees and commissions that are usually set and non-negotiable.

Why Are The OTC Trades Not Recorded?

Largely because these are done by individuals and entities that prefer to be anonymous and private. On the blockchain, you can always track where what went, even if you don’t know who’s behind the transfer. But, with the brokers, none of that trade is trackable.

According to Ray Youssef, CEO of p2p Bitcoin broker, Paxful, most trades aren’t visible on the blockchain

“due to privacy reasons… occasionally, users can work out the transfer of an entire wallet so as to not indicate a shift in a large number of holdings.”

Bottom line, it is possible for their clients to buy up entire wallets.

“Large trades can also be conducted in such a way that they are very difficult to trace through the blockchain. “Other times, buyers and sellers use a tumbling process to mix fragments of coins that ultimately end up at the intended destination so as to avoid a record of a certain quantity moving from one to another,” he explained.

If entire wallets are purchased, then you can understand why the transaction will not reflect on the blockchain –there’s no transfer whatsoever. The buyer just takes possession of the private keys, seed phrases and every other necessary details and it becomes theirs.

Others Believe OTC Trading Doesn’t Impact Bitcoin’s Price

While the aforementioned makes sense, there are individuals who believe that these off-chain, high volume transactions have zero effect on the price of bitcoin.

Dr. Edgar Radjabl, Managing Partner at APIS Capital Management doesn’t believe that these transactions have any effect. He says,

“I don’t believe those trades affect the [Bitcoin] market at all,”… “Because they are not posted as orders on an exchange, market participants are not aware a large holder is selling or a large investor is buying,… In rare cases, the buyer may end up liquidating the BTC in the open market (for example if they purchase OTC at a discount) which would then drive the market down.”

He continued

“One argument can also be made is that when large buyers purchase BTC, they seek OTC sellers (such as miners). Therefore, they do not have to purchase BTC in the market, which would drive the price up.”

If anything, he contends that it’s this OTC trading that may have been responsible for bitcoin’s price slump.

“I would contend that is a significant explanation for why BTC price has stayed steady in 2018. In 2017, large buyers had to buy on exchanges (or pay a significant premium for OTC), driving the market up.”

Do These Whales Have an Identity?

While there’s no concrete data or information on those who participate in these high volume OTC trades, there are rumors about who they may be.

Edgar thinks that

“The sellers are typically miners of BTC (generally located in China),”… The buyers… are typically located in Europe, US and other developing countries (which traditionally have had issues with fiat currencies and thus want to diversify into ‘hedge’ assets.”

Another expert, Jack J. Jia, Director of Institutional Sales at Wyre, a Money Service Business (MSB) firm, said the bulk of them are

“definitely mostly in Asia, with China still being the #1 country for fiat clearance.”… “A trader might trade crypto-to-crypto on a Korean exchange or a Singaporean exchange or a Japanese exchange in terms of central limit order books, but if the trader needs to rebalance via fiat currency, they will turn to OTC trading services based in China and settle in and out of RMB,”

Ray Youssef on the other hand, thinks

“These customers are like anyone else, buying quantities large and small in hopes of storing or transferring wealth beyond the regulatory grasp of the countries in which they live.”

This means countries like China, with its strict regulations on crypto trading –particularly on exchanges- may be a possible location for the bulk of these trades.


While OTC trading is currently at an all-time high, there are experts and analysts who believe that may change in near future.

This will be predicated on the continual improvement of crypto exchanges, their security measures, robust liquidity, and discretion. But, Youssef doesn’t believe it’s going away anytime soon. He said,

“OTC trades are more in line with the traditional ideology of bitcoin,”… “Scaling issues have forced many transactions off chain onto privately owned and centralized exchanges, however, the future of bitcoin will always lie in OTC trades for the reasons with centralization comes corruption, always.”

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