Where Do the Biggest Investors in the Crypto Industry Trade? Take a Look At the Over-The-Counter Market
An international research company called TABB Group recently created an analytical report that exposes some interesting truths of the cryptocurrency industry. The most interesting of this information is that the over-the-counter market for Bitcoin actually surpasses the volume of the global bitcoin exchange market.
Most Bitcoin analysts, for quiet some time, predicted that the OTC market would be responsible for trading billions of dollars, which the primary traders being investors, institutions, and miners. There are multiple crypto platforms that handle hundreds of millions of dollars daily in trading, like Coinbase, OKEx, Huobi, and Binance. However, there just are not enough liquid assets to their name to be able to handle even one or two multi-billion-dollar orders to sell.
Without this liquidity, major exchanges are at risk for losing out on major trading opportunities with high-profile investors. In fact, making the move to sell this much in tokens in such a small amount of time has the potential to bring the whole market crumbling down. The biggest risk comes if the industry lacks the number of buy orders that they need to fully liquidize the massive sell orders.
As a result, many of the higher spending investors and institutions focus on the use of OTC market for their transactions, giving them large portions or Bitcoin, Ether, and similar tokens to work with.
In the report this week with TABB Group, the organization states that the OTC market that handles Bitcoin exceeds the exchange market twice or three times over. If this statement is based in fact, and the exchange market truly handles $4 billion daily, then it would be right to assume that the OTC market takes care of approximately $12 billion each day on average.
One researcher who read through this report, Eric Wall, commented, “Just read an estimate from the TABB Group (in a $5,000 report) that OTC crypto markets exceed exchange volumes by 2-3x. That would mean 1 to 1.5 million BTC is traded OTC daily. Strange it’s not visible on the blockchain, which shows a meager 100,000 a day.” A senior fintech analyst with TABB Group, Monica Summerville, defended the $12 billion figure by saying that their information was based on both evaluation of the market and interviews.
Summerville continued, saying, “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 Bottom Line – What Does It Mean?
Without the same foundation of the rest of the financial sector, cryptocurrency’s movement on the exchange has an unpredictable future from minute to minute. One of the scariest parts of investing on this kind of platform is the rate of volatility. As sturdy as Bitcoin is, it still experiences wiggle room of up to 10% either in profit or loss daily. If the exchange market is such a small piece of the cryptocurrency pie, it becomes much more challenging to figure out what makes the market move. Without some sort of understanding of what causes the market to change, new exchanges and even experienced investors will be hard-pressed to make any money.