Boom in OTC trading during the crypto bear market

Cumberland, a subsidiary of DRW, said that OTC trading was up 30% in the last week compared to the previous month.

Investors hedge against bearish phase with OTC trading

In a cryptocurrency market that still can’t seem to find a support point from which to restart and continues to slide lower and lower, with Bitcoin also losing the crucial psychological support of $20,000, there is one market that is going up. Over The Counter (OTC) trading, a decentralized market in which market participants trade stocks, commodities, currencies or other instruments directly between two parties and without a central exchange or intermediary, continues to rise as everything collapses.

The crypto consulting firm, Bravecoin.com, reported in April that daily OTC volumes were three times higher than on traditional exchanges. This is also because in these types of markets the traders are mainly large investors, such as hedge funds.

The OTC cryptocurrency trading desk, Cumberland, a subsidiary of DRW, explained that on 13 June the company recorded 30% more volume than the high since the beginning of the year before the last market crash. 

Large institutions contribute the most to OTC volume

Last March, US banking giant Goldman Sachs executed a first OTC crypto transaction with crypto investment firm Galaxy Digital Holdings. Damien Vanderwilt, Co-President and Head of Global Markets at Galaxy said: 

“We are pleased to continue to strengthen our relationship with Goldman and expect the transaction to open the door for other banks considering OTC as a conduit for trading digital assets“.

These types of transactions differ from normal transactions on exchange markets in that they possess greater liquidity than exchanges and are not influenced by spot markets. This is precisely why they are the market of choice for large institutional investors, who can thus invest in cryptocurrencies without the limitations of normal traditional markets.

One of the world’s leading OTC desks, Cumberland, issued a statement in recent days explaining:

“On big swings, more volume tends to come to OTC desks, and yesterday was no exception; it was the most volume we’ve seen so far this year. In fact, it was 30% more volume than the previous YTD high, May 13th. Traders tend to use OTC during fast markets because it’s much easier to move size. Volumes were very BTC-centric, with about 75% of the total flow in bitcoin. ETH was the majority of the remainder. When looking to exit risk, traders tend to trade the most liquid products”.