What is OTC in Trading: A Complete Guide to Over-the-Counter Trading

Over-the-Counter (OTC) trading is a mechanism for buying and selling cryptocurrencies directly between two participants without the involvement of an exchange. Unlike standard trading on platforms, where prices are formed based on order books, OTC deals involve the parties independently agreeing on exchange terms and prices. This means each transaction is unique and can be tailored to the specific needs of the participants.

Definition of OTC Trading and Its Key Characteristics

OTC (Over The Counter) is a form of trading that occurs outside official trading venues. The main feature of OTC trading is the direct interaction between the buyer and the seller. Counterparties negotiate the price and volume of the transaction according to their interests, allowing them to avoid market fluctuations and obtain more favorable conditions for large volumes.

This approach is especially attractive for participants looking to execute significant deals without substantially impacting the overall market price. OTC trading provides confidentiality for operations and greater flexibility in determining asset exchange terms.

Who Can Participate in OTC Operations: Requirements and Restrictions

To access OTC trading, a participant must undergo KYC-1 level identity verification. This is a standard requirement applied to individuals and ensures compliance with anti-money laundering regulations.

It should be noted that OTC deals are not available to users who have activated margin trading on the spot market or use institutional lending services. Additionally, OTC can be operated on both main accounts and sub-accounts, providing extra flexibility in portfolio management.

OTC vs. Exchange Trading: Main Differences

There are fundamental differences between OTC deals and traditional exchange trading. Exchange trading uses a centralized order matching mechanism through an order book, where prices are formed by supply and demand from multiple participants. In contrast, OTC trading involves direct agreement on terms between two parties.

OTC operations are recommended for large volumes, as they provide access to fixed prices without volatility influence. Exchange trading is better suited for smaller volumes and participants seeking liquidity.

There is also a hybrid approach—asset conversion through specialized services that occupy a middle ground between full OTC and open markets. These services are used for exchanging moderate volumes between popular pairs.

Which Assets Are Available for OTC Conversion

The range of assets supported in OTC trading includes major cryptocurrencies and stablecoins. For example, you can exchange USDT (Tether) and USDC (USD Coin) for primary digital assets like Ethereum (ETH) and Bitcoin (BTC). Reverse conversion is also available: you can exchange ETH or BTC back into stablecoins.

Additionally, direct swaps between stablecoins are possible—for example, between USDT and USDC. Although traditional fiat currency conversions (such as dollars or euros) are not currently supported in OTC, the list of supported assets is regularly expanding with new cryptocurrencies.

How to Start OTC Trading: Step-by-Step Guide

The process of executing an OTC deal is straightforward and can be completed via the web interface or mobile app of most modern cryptocurrency platforms.

Basic steps:

1. Go to the OTC trading section (usually found in the main menu or trading tools navigation)
2. Select the cryptocurrency you want to give
3. Specify the asset you want to receive
4. Enter the volume of the operation in the appropriate field
5. Review the proposed conditions and conversion details
6. Confirm the deal through additional verification (if required)

After completing these steps, the assets will be credited to your account. The entire process takes minimal time thanks to automated processing.

Terms and Fees for OTC Operations

One of the key advantages of OTC trading is the absence of transaction fees. Unlike exchange trading, where traders pay a commission on each transaction, OTC deals are executed without additional charges.

Time efficiency is also a significant benefit: asset conversion occurs almost instantly. This means the participant receives the asset within seconds, without delays or waiting for confirmation.

Practical Tips for Safe OTC Trading

When conducting OTC deals, it is important to verify the counterparty and the terms of the contract. Ensure that the platform you use has a reputable reputation and proper licenses. Always check prices before confirming, as they may differ from current market quotes.

OTC trading remains an effective tool for market participants who need flexibility, confidentiality, and the ability to execute large operations without impacting the overall market price.