A small set of 20 OTC (Over the Counter) traders and clients have been closing deals chatting on skype. Instead of depending on exchanges like Coinbase or Kraken, participants are sending fiat via bank wires and cryptocurrency directly to each other’s wallets.
Trading outside the popular cryptocurrency venues can be seen as risk management, trying to avoid losing funds in the case of another exchange hacking or any other incident that can take down an established exchange. It can also be a way for whales to avoid making big waves or spooking the market by keeping their trades private. OTC trading may appeal to those wary of stashing coins and fiat currency with digital exchanges after high-profile hacks and other issues.
Biggest investors now use apps like Skype in order to avoid creating turbulence that would come as a consequence of doing their business via online exchanges.
Now, cryptocurrency desks handle over $100 million a day in transactions, which is tenfold year-over-year. DCG’s Genesis Global Trading on average trades $75 million to $80 million daily, Chief Executive Michael Moro said, and in December reached a monthly record of between $1.5 billion and $2 billion. Circle traded OTC up to $4 billion a month over the past year, spokeswoman Jennifer Hanley said.
To avoid potential problems some record calls, register with US regulators, follow KYC and compliance standards, as well as only trade bitcoin and a handful of altcoins. OTC trading carries its own risks to participants. Price discovery is murkier, and there is higher settlement risk. Clients also need to trust brokers to vet counterparties to avoid inadvertently helping launder illegal funds.
This event highlights the truly decentralized nature of cryptocurrency. There is absolutely no way to trade Fiat currencies in a way that you don’t have to rely on centralized financial institutions.