Crypto trading is shaping up to exceed previous limits in 2024 and beyond. Consequently, two major platforms for crypto trading, centralized exchanges, and over-the-counter desks, are competing for a larger portion of the market. As you might expect, this is changing the way investors trade.
Here are some insights about the future of crypto trading from the crypto OTC desks.
More Organizations are Getting Involved in Crypto Trading
Despite 2022’s bear market and the subsequent exit of many retail investors from the crypto market, many financial organizations and institutions have surprisingly increased their crypto investments. 2022’s highly heralded ‘crypto winter’ saw many crypto assets experience up to 70% reduction in value. Several insolvency issues and a series of failures like the FTX financial scandal also marked the period.
One would expect a combination of these to be a recipe for a decline in institutional participation. However, the opposite seems to be the case. Recent survey reports involving institutions and organizations actively trading crypto show that over half are knee-deep in the market, having spent an average of 4 – 6 years.
Consequently, they’ve developed ample experience with market movements. Many organizations are used to the rise and fall of cryptocurrencies, which signals a wider acceptance of them as a legitimate asset class. Crypto trading is here to stay.
Crypto OTC Desks are Getting More Action
When cryptocurrencies became mainstream, OTC desks were the primary forms of trading. As adoption grew, centralized exchanges scaled to get a larger piece of the crypto trading pie. However, some of Australia’s trusted Bitcoin and crypto OTC desks, like this one: https://www.independentreserve.com/au/features/otc, reveal that they have been getting a good portion of those crypto trading actions, thus marking a significant comeback.
A market research survey of some willing OTC desks reveals that they had an average trading volume of $1.44 billion in the first three quarters of 2023. And market participants are still expecting further growth in the years to come ahead of Bitcoin’s current bull charge.
Major reasons driving this growth include the liquidity provided by OTC desks, which inadvertently stabilizes the entire crypto market. More importantly, big crypto market players value the privacy OTC desks provide. They will play a greater role in the future of crypto trading.
Physical Crypto OTC Desks are Making Crypto Trading More Accessible to “Less Familiar” Individuals
A major positive for the cryptocurrency ecosystem regarding the more involved role of OTC desks is the adoption of crypto by more individuals. Crypto is more popular than it was in the early days of Bitcoin. Nonetheless, a large amount of individuals are still unaware of its inner workings and aren’t involved in the market. However, the straightforward nature of crypto trading at OTC crypto desks makes it easy for individuals in this category.
They also provide an easy gap for bridging crypto and fiat currencies. As a result, individuals with some level of skepticism derive a sense of safety that they can get their fiat money back whenever they choose. These physical crypto OTC desks are currently being massively adopted in regions like the Philippines and Dubai.
Organizations and Institutions Prefer Institutional Crypto OTC Desks to Centralized Exchanges
For obvious reasons like privacy, liquidity, and the prevention of price slippage, many institutional crypto traders prefer to trade at OTC desks instead of centralized exchanges. A whopping 80% of OTC crypto desk respondents reported an increase in their client base in 2023 compared to 2022.
This growth signals institutional investors’ preference for the professionalism, discretion, and best-price execution offered by OTC crypto desks. Due to the private nature of these transactions, many OTC desks are unwilling to share the exact amount of crypto they trade daily. However, speculation shows that it might be double or triple the amount on centralized exchanges for institutional investors.
Regulations Remain Ambiguous
Yet, despite this growth, government agencies across different regions haven’t quite completely figured out the best approach to regulating the markets. The recent approval of 11 spot Bitcoin Exchange Traded Funds (ETFs) by the United States’s Security and Exchange Commission (SEC) is a step in the right direction, as it has greatly boosted investor confidence. However, the entire regulatory framework isn’t complete.
Consequently, OTC trading desks experience regulatory effects differently depending on their client base and work process. Survey reports of some OTC desks show that 40% of them do not feel any effect of regulations on their operations, while 33.3% are impressed as they claim to have seen positive effects. The remaining percentage report a negative effect of regulations on their operations.
There’s more work to be done.
International Online Exchanges Still Account for the Majority of Crypto Trades Globally
Despite OTC desks being the go-to platform for the majority of institutional investors, most of the world’s crypto trades still happen on centralized exchanges. Online exchanges such as Binance, OKEx, UEEx, etc., are touted to handle approximately 95% of the total global crypto trades.
For now, OTC crypto desks are majorly helping users convert their fiat to cryptocurrencies and vice versa by serving as on-ramps and off-ramps.
Technology and Infrastructure Will be Pivotal to The Future of Crypto Trading at OTC Desks
To gain a larger percentage of the global trading volume, technology will play numerous vital roles in giving OTC desks a competitive advantage. For instance, OTC desks will need advanced technological infrastructure to improve the speed and efficiency of the trade execution process. As the trading volumes increase, OTC crypto desks will need more secure and scalable technology to fend off rising cyber-attacks and cope with increased loads.
Technology can also be crucial to establishing trust, transparency, and compliance with emerging regulatory requirements. Only then can the OTC crypto trading crypto market truly reach the different trading markets worldwide.
Conclusion
The magnitude of crypto investments makes it clear that cryptocurrencies are here to stay. However, how they’re traded might change in the future as many institutions find the advantages of OTC desks irresistible.
Nonetheless, centralized exchanges currently still hold the aces. However, all that may change in the future depends on the effects of technology on the crypto ecosystem. Interesting times ahead!
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