OTC exchange vs exchange: Which should crypto players choose?

What is OTC? Simply put, it is a trading method that bypasses the exchange, where two people trade directly with each other. This is especially attractive for large transactions — it does not go through the public order book, and the price will not be impacted.

Why do institutions and large holders love OTC?

1. High Privacy - Transactions are not recorded on the blockchain, so others cannot see what you are doing.
2. Deep Liquidity - Brokers can connect both parties, able to handle orders over 1 million USD without significant slippage.
3. Flexible Settlement - Terms can be negotiated, transfer methods and timing can also be discussed.

What about the risks?

• Counterparty Risk - What to do if the trading counterparty runs away/defaults?
• Price Transparency - OTC prices may differ significantly from the exchange, relying entirely on negotiation.
• Regulatory Pressure - Must comply with KYC/AML regulations, or it is easy to be monitored.

OTC vs exchange comparison:

• OTC: slow but discreet, large amounts without crashing the market, requires brokers
• exchange: fast execution, price transparency, but large orders are prone to slippage

Several OTC operation strategies:

• Market makers earn the spread (OTC price vs exchange price)
• Cross-platform arbitrage (buy low sell high)
• Hedge risks with derivatives

Bottom line: OTC is suitable for large players and institutions, but due diligence is essential to find reliable brokers. Small investors are better off playing on the exchange for peace of mind.