Bitcoin Bulls Are Storming Wall Street’s Crypto Trading Desks

  • OTC desks across crypto are seeing bulls surge the market
  • That’s a sharp reversal from the end of 2018, a number of trading firms said


Wall Street’s trading desks offer a glimmer of hope for the floundering cryptocurrency market.

Buying pressure has increased at many of the so-called over-the-counter trading desks across the crypto world. The bullish sentiment mimics recent price action across the spot exchange market for crypto and is a sharp reversal from the environment at the end of 2018, numerous trading firms said.

One of the largest over-the-counter trading firms in crypto, Cumberland, tweeted Tuesday that the imbalance between buyers and sellers spiked by 60% over the last week. “Historically, our OTC trading is relatively balanced between buyers and sellers,” the firm said. “Over the last week, our OTC buy/sell ratio (by notional value) has increased approximately 60% towards counterparties buying.” Again, Cumberland isn’t alone.

Genesis Trading’s CEO Michael Moro said his firm also saw more buy orders flood in relative to the end of 2018 when a sizable number of crypto investors were selling for tax purposes. “I’ll echo Cumberland’s sentiments,” he said in an email. “Year-end saw quite a bit of selling for numerous reasons (e.g. tax loss selling and liquidation of crypto donations).”

“As the year turned, the selling pressure from such activities has subsided, and we have seen more buy-side interest pick up,” he added.

OTC desks oversee billions of dollars worth of institutional crypto trading on a daily basis. And in some respects, OTC trading paints a better picture of where the crypto market is from an institutional perspective as that’s where the largest trades are executed. As Monica Summerville, director of fintech research at capital markets consultancy Tabb Group noted in Forbes, “The big deals have to go OTC. A lot of the exchanges limit the order size, so you have to break up your orders, and that’s just fatal.” Summerville estimates that the OTC market is approximately two to three times larger than the trading activity across retail exchanges, including Kraken, Coinbase, and Binance.

Elsewhere, Galaxy Digital also says the tide has turned. “Galaxy’s trading desk saw robust tax-driven trading activity into year-end from asset manager and treasury accounts,” the firm said in a statement. “In early January, much of the flow reversed to buy back previously sold assets. Additionally, we have seen increased buying from Asia and EMEA traders, while some active sellers took a pause to start the year.” It’s a similar story at New York-based Paxos.

The firm, which operates both an OTC desk and an exchange, reports bullish trading activity in January.

“The nature of most of our trading flow so far this year has been buy tickets from emerging market traders,” said Paul Ciavardini, head of OTC trading at Paxos.

As for Circle’s OTC desk, the firm saw elevated sell pressure in December 2018 but that has “come back down in Jan 2019,” a spokesperson said in an emailed statement. “Sells by notional were slightly higher in December, but have started to reverse in early January,” the statement added. “Separately, we are seeing greater activity in trading alts and stablecoins in the first weeks of 2019.”

Still, there’s always one outlier. DV Chain CEO Garrett See said that his firm hasn’t seen a material difference between activity this month and the end of 2018.

“In January, it’s a pretty even between buyers and sellers, with marginally more buys than sells, but not materially more,” he said.

Author: Frank Chaparro
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Can the OTC Market Actually Have a Significant Impact on the Bitcoin Price?

The over-the-counter (OTC) market has long been considered to be bigger in size and volume than the crypto exchange market, having a bigger impact on the Bitcoin price.

Large institutional investors and high profile retail traders often rely on the OTC market for orders that typically exceed $1 million to ensure the market has enough liquidity to facilitate the settlement.

Why OTC Market is Better Than Bitcoin Exchanges

On major fiat-to-crypto exchanges like Coinbase, Skew, a cryptocurrency options market data provider, said that purchasing over $4 million in Bitcoin could cost an investor a 10 percent premium.

The inefficiency of placing large orders on cryptocurrency exchanges naturally lead investors into the OTC market, as large premiums result in substantially higher rates.

The Skew research team wrote:

Buying 1,000 BTC at market today on Coinbase would cost you $4,400 per coin, almost 10% of premium to spot for only a $ million trade. Not good. Like in FX, the liquidity for physical bitcoin is fragmented across exchanges so market makers will usually put together the various order books – ‘aggregated order books’ – and execute across venues. Still, the liquidity for physical bitcoin is not great.

Throughout the past several months, several major cryptocurrency exchanges in the likes of Coinbase have established custodial solutions to help institutions invest in the digital asset market with high liquidity.

The minimum investment threshold on Coinbase Custody is $5 million, which if bought on cryptocurrency exchanges could easily result in a 10 to 15 percent premium rate.

Over-the-counter cryptocurrency trading could be as much as three times as large as volumes on conventional exchanges, silently moving the bitcoin price one way or the other.

In July, TABB Group, an international research company, reported that the OTC market is estimated to be two to three times larger than the cryptocurrency exchange market.

The cryptocurrency exchange market processes around $4 billion worth of Bitcoin trades on a daily basis. Based on the findings of Tabb Group, the OTC market could be processing nearly $8 billion per day and up to $12 billion.

At the time, Monica Summerville, a senior FinTech analyst at Tabb Group, responded to inquiries on the lack of movement of large transfers on the Bitcoin blockchain by stating that in many cases, Bitcoin holders pass on the wallets and the private keys to the wallets to the buyers and as such, not all transactions are broadcasted to the public blockchain.

“Our reports are based on interviews and with participants in markets, cover more than BTC and keep in mind that not all transactions show up on public blockchains as many venues omnibus accounts so only net changes to their positions will be written to public blockchain,” she said.

Custody Will Increase the Volume

In the fourth quarter of 2018, Fidelity, the fourth largest asset manager in the world, debuted Fidelity Digital Assets to provide cryptocurrency custody targeted at institutional investors.

The trend in several major markets including Japan, South Korea, and the United States is shifting from the development of infrastructure focused on individual traders to custodial solutions and strictly regulated investment vehicles, which may allow the OTC market to have even a larger impact on the price trend of Bitcoin in the long-term.

Author: Joseph Young
Image Credit:  Charts from TradingView.

Crypto Exchange Poloniex Launches Institutional Trading Services

Crypto exchange Poloniex has announced the opening of trading services for institutional clients.

The company, which was acquired by payments firm Circle earlier this year, said Tuesday that it will begin offering institutional accounts, with support for different crypto trading pairs and API interfaces. The exchange will also provide no-fee transactions for all bitcoin/USD Coin trades in December.

As part of its new accounts, Circle is offering over-the-counter trading through Circle Trade, services through Poloniex and trading pairs with the USDC stablecoin, according to a registration page. Firms looking to participate in OTC trading must issue a minimum order size of $250,000.

In its announcement, Circle explained that it would offer institutional clients higher withdrawal limits, as well as “professional customer support.”

“Our highly trained team will guide each institutional customer through the onboarding process, coordinate issue resolution across multiple teams and support ongoing trading activities,” the firm explained

Circle and Poloniex join industry exchanges like Coinbase in offering services specifically for institutional traders. The latter exchange, which also offers USDC trading pairs, began rolling out custody services for its institutional clients in May.

More recently, Coinbase has also begun trialing an OTC trading desk, though the platform will not go live until early next year.

Author: Nikhilesh De
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