The emergence of cryptocurrencies and its increasing popularity has generated demand for qualitatively new services for the treatment of digital money. However, official structures are experiencing issues working with virtual money. But for most institutional investors, formal acceptance and availability of services are just the necessary factors to expand the presence.
One way or another, cryptocurrencies have already made its way into “fashion” and came out of it. Despite the obvious decrease in the hype around this topic compared to 2018 and 2017, the daily volume of exchange transactions conducted only with bitcoin is 4 billion dollars. At the same time, the OTC volume reported is 2–3 times higher (~$10 billion).
OTC trading as an underlying process
“Generally, you would go trade through an OTC desk when you have a large block trade you want to do without moving the market too much or incurring too much slippage,” said Kevin Zhou, founder of cryptocurrency-focused hedge fund Galois Capital.
Large transactions on exchanges affect the rate of cryptocurrencies, as there are mechanisms similar to the securities market. For example, in 2013, one user wanted to buy digital coins for $15 million. As a result of the purchase of 25 thousand Bitcoins, their value rose from 527 to 753 dollars. In the situation with OTC trading, it is possible to agree in advance on a specific price that does not exceed more than 1% of the official rate.
Also, the OTC platform acts not only as an intermediary. Hence, the service works honestly, it is responsible for large amounts. For this reason, the online marketplace must act in accordance with the KYC (know your customer) procedure. Thus, it has the opportunity to work in the legal field. In some cases, service owners contact the regulator to obtain a license to operate. In this situation, the site must meet the requirements of AML (anti-money laundering).
Trading involves high risks, so the issue of trust between players becomes important. Legal services value their reputation, while “gray” market participants may neglect the issue of security. OTC platforms operate despite regulatory sanctions, which attracts users. The more the authorities will pay attention to the activities of official trading platforms, the higher will be the money turnover on OTC resources.
While the business is growing, there is still uncertainty on the market. For example, OTC desks in the United States are grappling with an absence of clear rules from regulators. For example, the U.S. Commodity Futures Trading Commission calls bitcoin a commodity. The Securities and Exchange Commission has said some cryptocurrencies may be securities without specifying further. On the contrary, in Switzerland, there are clear rules from the regulator, so the legal field is transparent: cryptocurrencies and exchanges are legal, and the country has adopted a remarkably progressive stance towards cryptocurrency regulations. The Swiss Federal Tax Administration (SFTA) considers cryptocurrencies to be assets: they are subject to the Swiss wealth tax and must be declared on annual tax returns. In 2016, the town of Zug, a prominent global cryptocurrency hub, introduced Bitcoin as a way of paying city fees. In January 2018, Swiss Economics Minister Johann Schneider-Ammann stated that he was aiming to make Switzerland “the crypto-nation”.
What was before?
Long story short, a couple of years ago our partner family office asked to help in purchasing large amounts of coins.
In general, to buy digital money in large volumes, you can use a centralized exchange, but such an operation will take a lot of money from you. Also: web resource is not always ready to offer the required amount of virtual assets. In addition, the value of the cryptocurrency will vary directly in the process of the transaction, which will not allow forecasting the outcome of the transfer in advance.
On the other hand, large OTC platforms carry out transfers using Bank transfers and by sending digital coins between wallets. The value of the assets is discussed prior to the purchase of cryptocurrency.
Aside from regulation, there are other certain problems within the market. Often you can be offered with low fees, but the Desk still will make money on the spread, which will be different from the market. Knowing at what exchange rate is fixed, on large blocks OTC Desk can move the course in a favorable direction before fixing the price. Well, there are also people with square eyes who are trying to knit very large blocks of 50 thousand bitcoin and more — this is all, unfortunately, a loss of time in 99.9% of cases.
It’s been a long way here. We’re are happy to welcome you via @medium. We’re also proud to present you Hedgeblock — a regulated OTC brokerage. We offer you to visit our site, which makes us one step closer to completing our set of goals on platform development. We want to make sure everything is on the level, so certain elements may change during the site’s evolution.
Why Hedgeblock is different?
Hedgeblock.co is the only one in the world to offer:
Swiss private bank infrastructure to process transactions
Include introducer and intermediaries from scratch in the transactions
Externalization of the verification of clients through the big accounting firms to safeguard your confidential information.
Automated platform to streamline the onboarding and contracting between parties involved in the deal
Marketplace to choose the counterpart that suits you the most
If you’re not excited yet, there is more. Growing suspense in a proper way is crucial for getting long-term benefits. And as we started with the Medium, we’ll be also happy to see you in our other social media platforms. And while our support dusting off the manuals, we invite you to join the official chat.
Ready to streamline your OTC process with HedgeBlock? Contact us! And remember, everything has just changed!
And remember, everything has just changed!
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