How to Make Money with DeFi OTC
There has been a recent surge in products as well as platforms providing DeFi services. Decentralized Finance, commonly referred to as DeFi denotes any kind of financial service that is offered on blockchain usually Ethereum smart contracts. An example of DeFi services and solutions is Over-the-Counter (OTC) cryptocurrency which in the past three years has witnessed enormous growth marked by a substantial increase in volume and clients across the globe. a recent report by Bloomberg established that OTC turnover in 2018 amounted to more than 5.47 trillion USD equivalent.
What is OTC Trading?
OTC trading is a form of cryptocurrency trading where the actual trade occurs “Over-the-counter” instead of a regular cryptocurrency exchange such as Binance and Bitfinex. OTC trading is usually done by large-scale cryptocurrency traders and are often placed by hedge funds, private wealth managers or individuals with a high crypto net worth.
In the crypto space, OTC trading occurs in different ways such as:
- OTC brokers- There are OTC trade brokers who specialize in handling large transactions. Usually, they are in the form of platforms where traders sign up to get access to services that will enable them execute large trade blocks, access funds through liquidity providers to avert problems with slippage. Notable OTC brokers include itBit and com.
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- Cryptocurrency ATMs- Crypto ATMs usually Bitcoin ATMs assist traders to convert their fiat currency into digital coins without needing to go through an online exchange.
- Via chat rooms- There are several chatrooms that offer OTC trading. bitcoin-otc is an IRC chatroom that accomplishes bitcoin trading. It is hosted on various IRC channels which allows peer-to-peer transactions between traders.
How to Make Money Via OTC Trading
Before finding out how to make money with OTC trading, its important to know how OTC transactions work. The first step in any OTC transaction is finding a counterparty for the trade. This is usually accomplished via a chatroom such as #bitcoin-otc or an OTC brokering platform.
After finding a counterparty for the trade, the next step is to negotiate the terms of the trade. For instance, if you’re looking to buy BTC, the are required to specify the following terms:
- The amount of BTC you wish to buy
- The price of BTC you want to buy at
- When you want the trade to take place
Following the specification of the above terms, a seller will then respond with their offer price for the transaction. The price is usually expressed as a percentage above a leading exchange’s best available price. For instance, Exchange ABC + 1%. The negotiation process is usually varies depending on whether you’re a buyer or a seller, the medium you’re using to arrange the trade as well as the amount of transaction in question plus whether you have any leverage.
Once a price has been agreed upon, the buyer then sends a bank transfer to the seller to cover the purchase price, and the seller also sends the agreed amount of crypto coins or tokens to the buyer. Sometimes, the traders may be required to complete KYC (Know Your Customer) usually depending on the country or state both parties reside so as to satisfy the legal requirements.
How does an OTC Trader Make Money?
OTC trading provides an easy way to get your hands on some crypto. Making money via OTC trading is primary accomplished through arbitrage-the process of buying/selling a product or service in one location and then selling/buying it back in another location at a better price to secure a profit. Usually, arbitrage occurs virtually in the crypto space.
To start the arbitrage process, you should first establish how the market price is performing by monitoring exchange feeds. Next, buy up some crypto cheaply form an exchange or from the various methods of purchasing crypto listed above. The final step is to sell via AirSwap or LocalBitcoins at a better price. Cryptocurrency arbitrage is quite advanced especially in the crypto space and you should know exactly what you’re doing.
Top OTC Brokers
As mentioned above, OTC trading can be accomplished via OTC Brokers. There are several OTC brokers in the crypto space and therefore its important to choose the best broker for enhanced profits. Below are some of the best OTC brokers.
- Sibex
SIBEX is an OTC broker that assists users in trading Bitcoin and Ethereum using hashed time-locked contracts (HTLCs). The software assists you to discover peers, communicate with them, create special Bitcoin and Ethereum transactions, and validate incoming transactions. Sibex comes with powerful trading features such as the SIBEX GUI which assists you broadcast conditional offers to the SIBEX P2P network which are unique to P2P trading systems. For instance, with this system, if you’re buying a large amount of Bitcoin and you don’t want to move the price, you can choose to not report the completed trade price to the network.
The other perk of trading on Sibex is that you enjoy real-time settlement as well as low fees. With every trade being settled in real-time, on-chain, you’ll always pay miner fess in each SIBEX transaction. With SIBEX, you run your own server meaning that you’re in complete control of your money away from the praying eyes of hackers.
- Kraken
Kraken is based in San Francisco and was founded in 2011. It one of the largest Bitcoin exchanges in terms of Euro volume and liquidity. The platform offers Over The Counter brokerage services for high volume trades-over $100k. Additionally, frequent high volume traders are provided with a dedicated account manager to attend to their trading needs. Uses can also engage in OTC trading using FIAT currencies Canadian dollars, US dollars, Euros and Japanese yen.
- Circle
Circle is a platform for bitcoin trading that made its entry early in the game. Circle sold bitcoins directly to individuals and made it to be a great competitor to Coinbase. In the recent past, circle has rebranded itself to offer a variety of new products in a bid to stay relevant in the bitcoin market. Circle have also acquired Poloniex-a cryptocurrency exchange. Circle trade trades over $2b each month having desks in several time zones. This company’s OTC service sell and buy orders starting from $100k.
- ItBit
ItBit is a bitcoin exchange started in 2013. ItBit supplies Bitcoin trading services in the US for small and institutional investors under its regulated exchange. ItBit for institutions is a financial service dealing with institutions trading in Bitcoin. Service and support are provided to active traders and institutions by The Institutional Client Group (ICG). ItBit’s OTC trading offers personalized service for orders over $100k that has a quick settlement and low fees. ItBit’s OTC market has competitive pricing and being a regulated exchange, it attracts more clients.
In Conclusion
To wrap it up, its possible to make money via OTC trading primarily through the process of arbitrage. OTC trading can occur in several platforms including OTC brokers, Chatrooms and Crypto ATMs. A large volume of OTC trade occurs on broker platform that have been discussed above. The primary advantage of trading via OTC brokers is that you will enjoy more decentralization, less trading fees and also create less price movements for enhanced profits and reduced risks. Sibex is the leading OTC broker thanks to advanced features, low fess and real-time settlement.
