- May 30, 2018
- Posted by:
- Category: Uncategorized
OTC in the financial markets refers to over the counter trades. Securities or financial instruments traded outside of regular stock exchanges refer to Over the Counter trades. In traditional markets these stocks are sometimes more vulnerable or an unlisted stock. Furthermore these securities are penny stocks or at times from a small company that can’t meet the listing requirements of the exchanges.
Individuals, networks of dealers, brokers, and wealthy individuals facilitate OTC trades. Resulting in brokers or dealers acting as the market makers by quoting prices at which the product is going to be bought or sold at.
Bitcoin and OTC.
In recent years OTC trades for Bitcoin have sky rocketed as a result OTC trading volumes have surpassed trading volumes on exchanges. Over the counter trades are not executed on the exchanges therefore no outside parties know of the volume or the price of the particular cryptocurrency.
There is a counterparty risk in regards to OTC trades due to a party defaulting on the transaction prior to completion. A party may also decide to disregard contractual obligations and default on current and future payments.
Why OTC Trades matter to Cryptocurrency Holders and Investors.
Right now there is a reason for the massive surge in OTC trades. Hedgefund managers, extremely wealthy individuals or entities. often conduct these trades. Billions of dollars are going into crypto and not many individuals know about it.
This means cryptocurrencies in general are gaining traction behind the scenes. In my opinion this is great news. The wealthy are buying the crypto. For long term holders and new investors, this likely means a surge in prices in the not so distant future. The big players are getting in behind the scenes. These entities do not throw billions around into investments that they will lose out on.