What is an Exchange OTC and How do I Use It? | ULTIMATE GUIDE

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Today, traders go all out to find exchange mediums that will make their day-to-day life as stress-free and risk-free as possible hence, the incorporation of OTCs into the cryptocurrency system. As they keep gaining popularity among cryptocurrency enthusiasts, one should have basic knowledge of how they work. This article is here to give you just that. Let’s dive right in.

What is an Exchange OTC?

An over-the-counter exchange is self-explanatory. It is a platform that bypasses the traditional order book nature of virtual trading. These platforms allow people to trade directly with each other, eliminating the need for intermediaries. OTC traders essentially set their prices. So, a Bitcoin OTC transaction may see you buy Bitcoin at a slightly lower or higher rate than prevailing market rates and prices. 

While it’s similar to P2P trading, OTC is different in that brokers mediate trades to ensure smooth transactions.

Also Check ➤ ➤ A Candid Explanation of Bitcoin

General Overview of Exchange OTC

In an OTC exchange, the buyers and sellers can negotiate the terms of the trade, such as the price and quantity, directly with each other. OTC exchanges offer more flexibility than traditional exchanges as buyers and sellers can customize their trades to meet their specific needs and preferences.

OTC markets serve as a platform for trading various financial instruments such as stocks, bonds, and derivatives. They offer a replacement for the conventional exchange model and are commonly utilized for larger trades or assets with lower liquidity.

There are also specialized OTCs. These platforms cater to just one type of cryptocurrency. For example, a Bitcoin OTC platform may only have provisions for traders who want to buy or sell Bitcoin and nothing other than that. 

Also Read ➤ ➤ 5 Best Bitcoin Margin Trading Exchange 2023

How to Use an OTC Exchange

Using an OTC exchange is quite straightforward. Here is a step-by-step guide to help you navigate through the process:

Research and Choose

Start by researching different OTC exchanges available in the market. Check if the exchange has a history of trustworthy operations and if they implement robust security measures to protect user assets. You should also make sure it offers the specific cryptocurrencies you want to trade.

Read reviews and feedback regarding reliability, customer support, and overall user satisfaction. The last thing to do is to compare the fees charged by different exchanges and consider how they align with your trading volume and budget.

By considering these factors and doing thorough research, you can choose an OTC exchange that aligns with your trading goals and provides a secure and user-friendly experience. 

Contact the Exchange

After picking the OTC exchange of your choice, you can contact them through their web page or the contact information they have provided. When reaching out to the OTC exchange desk, make sure to communicate your trading requirements. Include details such as the amount you wish to trade and the specific cryptocurrencies involved. This information helps the exchange understand your needs and provide you with the necessary assistance.

Negotiate Terms

When you engage with an OTC exchange, they may assign you a broker or representative. This person will be your main point of contact throughout the trading process. You will then share what you hope to achieve through your trades, whether it’s long-term investment, short-term gains, or any other specific objectives you may have.

You will equally communicate the rate at which you want to buy or sell your cryptocurrencies to the broker. If you have any specific requirements for your trades, such as specific trading pairs or order types, make sure to discuss them with your broker. They will do their best to accommodate your needs within the capabilities of the OTC exchange.

KYC and Compliance

KYC, which stands for Know Your Customer, is a regular process that financial institutions and OTC exchanges follow to confirm the identity of their customers. As part of the process, you might need to upload scanned copies or take clear photos of your government-issued ID card, like a passport or driver’s license. They may also ask for proof of address, such as a utility bill or bank statement. Sometimes, they might even request a selfie or photo for facial recognition purposes.

Once you have submitted your documents, the OTC exchange will review them to verify your identity. This procedure might take a little while because they want to make sure the information you provided during registration matches up.

When OTC exchanges follow these regulations, they show that they are dedicated to creating a safe and reliable trading environment.

Execute the Trade

The OTC exchange will provide you with specific instructions on how to transfer funds for the trade. They will let you know where to send the funds to; either their wallet or an escrow account. A wallet serves as a virtual storage space for storing your cryptocurrencies, while an escrow account functions as a secure intermediary account that safeguards the funds until the trade is finalized. The OTC exchange will guide you on which option to use.

By following the instructions accurately, you’ll help ensure a smooth and successful transaction. Double-check the details before initiating the transfer to avoid any mistakes. The transfer process may take some time, depending on the blockchain network’s speed and the OTC exchange’s internal procedures.

Post-Trade Support

OTC exchanges often provide post-trade support to ensure a satisfactory experience. In case any challenge arises or you need clarification during the trade, feel free to contact your broker or reach out to the customer support of the exchange for help. They will be of assistance to you.

Also Read ➤ ➤ 5 Best Bitcoin Exchanges in India December 2023


With proper understanding, traders can take advantage of OTC services to conveniently and efficiently trade large volumes of assets outside of traditional exchange platforms. While OTC processes may vary among different desks, an ideal OTC platform should leave you satisfied at the end of every transaction.

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Aniruddh Chaturvedi
Aniruddh Chaturvedi

A typical college student who explores~

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