Trade Like the Whales: OTC Crypto Markets

Trade Like the Whales - OTC Crypto Markets - poster

The average crypto investor might put $100 or $1,000 on an exchange to buy and sell cryptocurrency. Now imagine you are placing an order for $1 million. The stakes are much higher, and if anything goes wrong you aren’t out a month’s rent, you are out a new beach house.

Big financial investors, known as whales, make careful decisions about how to trade financial instruments daily. Generally, this isn’t so difficult, as most markets cater toward the investor and are able to conduct trades based on their needs.

The cryptocurrency market is a different story. It is still a regulatory grey-area, and investment options for whales remain weak. This has caused these large investors to flock to over-the-counter (OTC) markets in order to conduct their trades in a safe and secure fashion, while also being able to fill their trades at the best prices.

How Does OTC Trading Work?

OTC trading occurs when an asset is traded directly from one trader to another without the use of an exchange to facilitate the trade. OTC markets have existed well before cryptocurrencies and are used in trading stocks, bonds, and other assets.

This type of trading is decentralized, without any controlling entity overseeing transactions. Often times, OTC trading utilizes the services of dealers who buy and sell assets on the market, turning a profit on the price difference between each trade. These dealers create liquidity in the OTC marketplace.

Benefits of OTC Crypto Trading

Traditional exchange-based trading involves bringing together buyers and sellers via an orderbook. Orders from interested buyers and sellers are posted to the order book, and the exchange matches orders together to conduct trades. However, there are significant problems with this model, problems which OTC trading solves.


Holding to one of the most important tenets of cryptocurrencies and their underlying technology, OTC markets are completely anonymous. This makes it easy for any trader to transact across cryptocurrencies without their information being traced.

Just last year, the United States government subpoenaed the cryptocurrency exchange Coinbase, forcing it to hand over personal information on its customers. Because Coinbase is a centralized exchange it controlled its users information in this way, and was therefore liable to the US government in providing this documentation.

OTC crypto markets hold to the anonymity which makes cryptocurrency so special in the first place. On OTC markets personal information is never collected and trades can never be censored for any reason.

Exchange Manipulation

Cryptocurrency exchanges are not the most transparent businesses. Some exchanges have been caught conducting shady business practices. One of the most common of these is what is known as wash trading. Wash trading involves fake trades on an exchange for the purpose of increasing perceived liquidity on that exchange. Generally, wash trading is done via the same party, where tokens are never actually trading hands. This is done to attract new traders through an increase in reported trading volumes. The Blockchain Transparency Institute recently found 7 out of the top 10 cryptocurrency exchanges participate in wash trading to an excessive degree.

Price Slippage

Large orders can have a hard time being filled in financial markets. This is because when a large order is placed, it takes multiple sellers to fill this one buy order. During the time of an order via an exchange, the price of the asset being purchased can experience price slippage.

Price slippage takes into account the price a trade was expected to execute, and the price that trade was actually executed. For small orders, price slippage is very minimal, since there is usually a seller on the other side and conducting the trade can happen almost instantly. However, trades conducted in large quantities can experience the most price slippage as they are very unlikely to be filled at one time. If a whale wants to conduct a very large trade on an exchange they usually have to do so in chunks or groupings, averaging out there proposed order over many different orders in the hopes it can be filled completely.

Slippage isn’t something which effects whales, as it can play a role in any market order no matter the size. This is because there is a lack of liquidity on many cryptocurrency exchanges which causes at least a small amount of slippage in most trades.


Chart from the report of exchange theftAnyone trading cryptocurrency over a trusted third-party exchange is taking a risk. This is because exchanges are prone to theft and hacking, making them easy targets for malicious actors. Everyone in the industry would have hoped at this point exchanges would be more secure and able to adequately protect user funds. However, it seems just the opposite is true, and theft from cryptocurrency exchanges has actually been on the rise in the early part of this year.

Traditional cryptocurrency exchanges require users to deposit funds into the exchange themselves. Users, therefore, must give-up control of their funds, handing them over to a third party which they are putting a great deal of faith in holding secure.

OTC markets, on the other hand, never handle customer funds directly. An OTC trader has funds in their own control at all times. This is because OTC trading is generally done on a peer-to-peer basis, where the trade occurs from one trader directly to another.

This is a risk worth taking for most investors who have only a small amount of capital invested in these markets. Whales, on the other hand, transact millions of dollars in a single trade, and therefore, aren’t willing to take any chances. OTC crypto exchanges provide a much safer method of conducting transactions without having to interact with a third-party exchange. One anonymous OTC trader even noted,

When the big [exchange] hacks happen we tend to see business go up.

OTC Trading Can Be Shady Business

Cryptocurrency trading on OTC markets can provide big-time investors with a way to securely make large trades. Yet, it can also be a breeding ground for money laundering and illegal business activity.

As previously mentioned, centralized exchanges track trading history and often collect personal information, making them a poor way for illegal business to be conducted. OTC markets, on the other hand, provide an easy way for illegal businesses to flourish under the radar of local authorities. OTC traders can remain anonymous and trade virtually untraced. This is likely why one of the earliest adopters of Bitcoin was the illegal drug trafficking website Silk Road.

Nothing New

Cryptocurrency OTC markets have been around even before the bull-run of 2017 where popularity rose to the mainstream. It is speculated that in 2016, the OTC Bitcoin market was greater than that of the total exchange market.

According to Civic founder and CEO Vinny Lingham:

Because OTC crypto trading cannot be verifiably tracked, no one truly knows its true impact. However, some OTC traders have reported they deal in more than $100 million in cryptocurrency trades every day, with orders from $75,000 and up.

Types of OTC Cryptocurrency Markets

 Logos of OTC marketsThere are a variety of new ways in which whales are trading crypto on OTC markets. Bitcoin OTC markets are the most common due to the prominence of Bitcoin in the cryptocurrency market as a whole, yet these OTC markets exist for other cryptocurrencies as well.

Online Messaging

Services such as Skype and WhatsApp are breeding grounds for massive OTC crypto trading. Many stakeholders, from brokers to investors and even miners, connect via these messaging outlets to conduct trades on a large scale. The Bitcoin OTC market on online messaging platforms is rampant across services, and money flows in and out of traders looking to profit from large trades. Yet conducting trades via these services appears to be a small percentage of players dealing in significant amounts of capital, making it a very exclusive club for only the trusted few.


With a minimum investment of $250,000, Circle is the quintessential OTC crypto market for whales. Circle may have the biggest name in the OTC market because of the backing it has received from large financial institutions. The platform has raised $140 million in funding from the likes of Goldman Sachs, Baidu, CICC Alpha, and more. The trading desk conducts trades in Bitcoin, Ether, and several other cryptocurrencies.


Much like Circle, Cumberland is a whale’s playground for OTC trading. It offers a wide array of over 30 cryptocurrencies to choose from, and has a lower, $100,000 minimum trade. Luckily for investors, Cumberland doesn’t charge any fees as it is a principal trading firm trading from its own accounts.


itBit charges its customers a flat fee per trade. Most major cryptocurrencies (BTC, ETH, BCH, XLM, etc.) can be traded on itBit. Although it will require a $100,000 minimum trade, itBit is a trusted OTC market for crypto traders. The company also offers institutional grade Bitcoin storage via its custodial services, meaning Bitcoin traders won’t need to find a trusted wallet service for their cryptocurrency.

Alternatives to OTC Markets

Some cryptocurrency trading options do not fall under the category of centralized exchange or OTC markets. These methods of trading provide the anonymity of OTC trading, but require trading within blockchains themselves. As such they are new technological advancements which may provide value to cryptocurrency investors who are searching for alternative ways to trade.

Decentralized Exchanges

Many view a decentralized exchange (DEX) as a way to participate in OTC crypto trading without high minimum investments. DEXs are becoming commonplace for trading, as investors across the spectrum don’t trust centralized exchange institutions to act fairly in conducting and facilitating trades. A DEX allows trades to be conducted on a peer-to-peer basis, without order matching from a centralized service. Additionally, funds are never held by the exchange, and are always in the control of the trading parties. There are already a host of different DEXs available for trading, such as Bitshares, Ox and Bisq among others.

Atomic Swaps

There is a new methodology in the works which would allow for cryptocurrency trading across blockchains without the need for any third-party. This new technology, known as atomic swaps, would eliminate the need for any exchange in a transaction occurring across more than one blockchain. Atomic swaps work by creating a hash time-locked contract which is activated when both parties in a trade place their transaction as promised. The parties then produce a unique cryptographic hash to confirm the transaction and release funds. In this way, two parties can directly exchange cryptocurrency from different blockchains in one transaction. Atomic swaps are still in development and not yet available for use.

OTC Trading Matters

Whether it comes to trading millions of dollars or a few hundred dollars, everyone wants their money to be protected. Unfortunately, traditional cryptocurrency exchanges are still not viewed as safe places in which to conduct trades. This is mostly due to the overwhelming amount of fraud and security mishaps which have weighed down the industry.

OTC crypto markets are great alternatives for conducting transactions directly with another party, while never giving up control of your assets. Most OTC trading options require large investments and are not suitable for the average investor. However, it is useful to explore the options which could work for you and your crypto trading.

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