Over The Counter (OTC)
Over-the-counter (OTC) trading is a type of financial transaction where two parties agree to buy or sell an asset directly without using any intermediaries, such as exchanges. OTC trades are usually done in large quantities and involve assets that cannot be traded on public stock markets. This includes cryptocurrency, which can be exchanged through OTC brokers or platforms.
The main benefit of OTC trading is the ability to conduct larger transactions than would otherwise be available on public exchanges due to their lower liquidity levels. Furthermore, investors may also find it easier to work with fewer regulatory requirements when dealing with over-the-counter trades compared to those found on traditional exchanges. This could potentially lead to better pricing for both buyers and sellers alike because they do not have to pay additional fees associated with listed securities and market makers.
However, there are some drawbacks that come along with this kind of investment strategy. For example, since there is no central authority overseeing these kinds of deals, investors must place full trust in their counterparty for the successful completion of the trade; if something goes wrong during the process then it’s up to them alone as there won’t be any dispute resolution services like those offered by most exchanges. Additionally, investors should also take into account potential liquidity risks as well as higher costs associated with finding suitable counterparties for larger orders since smaller ones will likely not have enough capital or interest in completing them efficiently and effectively at competitive prices.
Finally, while many traders claim that OTC trading provides a more secure way of conducting business due to its lack of transparency compared to other methods such as Central Limit Order Books (CLOB), one must always keep in mind various legal implications before engaging in any activity related thereto; thus it might be wise consult an attorney beforehand so you know what your rights are going forward and don’t run into any trouble down the line!
