Bitcoin OTC Market To Have Surpassed Bitcoin Exchange Volume
TABB Group, an international research company, has disclosed in its extensive analytical report that the over-the-counter (OTC) market of bitcoin is significantly larger than the global bitcoin exchange market.
The study has found that over the counter (OTC) cryptocurrency markets facilitate on average USD 12 billion of trades per day. If accurate and, depending on the study’s parameters, this means that OTC markets account for a significant fraction of global cryptocurrency trading volume.
For many years, the majority of bitcoin analysts predicted billions of dollars to be traded on a regular basis in the OTC market, by billionaire investors, institutions, and miners. While crypto exchanges like Coinbase, Binance, Huobi, OKEx, and UPbit process hundreds of millions of dollars worth of trades every day, the liquidity on these platforms are not sufficient to process multi-billion dollar buy and sell orders.
Essentially, billionaire traders and institutions have relied on the OTC market to buy and sell batches of bitcoin and other cryptocurrencies like ether, mostly from miners and other major investors.
There are several reasons why ‘whales’ prefer OTC trading to exchanges: cost-effective deals, exclusive asset classes, and personal support. However, the current state of crypto exchanges is giving no choice to big traders. One of the main issues is the lack of liquidity. Even though the daily volume of the top exchanges like OKEx or Binance exceeds $1 billion, the platforms may struggle processing multi-billion dollar orders. The transfer of the OTC trading to the crypto exchanges market would simply crash them.
Commenting on TABB’s research, Eric Wall, a crypto researcher tweeted:
Just read an estimate from the TABB Group (in a $5000 report) that OTC crypto markets exceed exchange volumes by 2-3x. That would mean 1-1.5MM BTC is traded OTC *daily*. Strange it's not visible on the blockchain, which shows a meager 100k/day.
— Eric Wall IS RIGHT (@ercwl) July 29, 2018
A senior analyst at TABB Group, Monica Summerville, says,
“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.”
Nothing concrete can be inferred from this development, however, one thing that can be safely said is that OTC markets are a major player in the global cryptocurrency trade. OTC is ideal for institutional investors versus using a normal exchange, since OTC pairs big buyers with big sellers, allowing for more efficient trades that cost less.