Cryptocurrency exchange Coinbase has launched an over-the-counter (OTC) trading desk for its institutional customers, Cheddar reports.
Institutional cryptocurrency investors prefer to purchase coins over-the-counter as opposed to an exchange as it removes the element of slippage, which is what happens on an exchange when an entity market buys an asset with a high volume of fiat.
For example, if the Bitcoin price was at $4,000 and the customer wanted to purchase 10,000 coins, the market order would push price significantly to the upside, meaning that the average buy-in price would be inflated compared to spot price. The benefit of trading over-the-counter is that the purchase price is fixed, often with a discount attached.
Christine Sandler, Head of Sales at Coinbase, says: “We launched our OTC business as a complement to our exchange business because we found a lot of institutions were using OTC as an on-ramp for crypto trading. We felt this was a huge benefit to our clients to actually leverage both our exchange and our OTC business.”
Coinbase isn’t the first exchange to dive into the over-the-counter market, US-based exchange Gemini launched its own OTC desk earlier this year while Circle launched Circle trade following the acquisition of Poloniex in February.
Next year could see a fundamental switch in the landscape of cryptocurrency, with institutional investors seemingly itching to get involved in the digital asset class. Nasdaq has plans to launch its own Bitcoin futures contract while the Intercontinental Exchange’s Bakkt futures is ready to go live on 24th January.