Coinbase, the leading U.S.-based cryptocurrency exchange, has launched an over-the-counter trading desk. However, the rollout was not accompanied by the usual marketing hype.
One of the largest cryptocurrency exchanges in the world, Coinbase, has launched an over-the-counter (OTC) trading desk earlier in November. The rollout, however, was kept under wraps.
According to officials, the firm, that was recently valued at $ 8 billion and raised $300 million in its latest round of funding, was keen first to gauge the response to the new offering from customers.
The development was reported earlier by CNBC. Tim Plakas, head OTC trader for Coinbase, said:
We wanted to make sure we had all the boxes checked before we went public. We needed to have some of our trusted institutional clients on board and were in a beta mode to make sure that all the pipes were working.
What is OTC Trading?
Over-the-counter trading is carried out directly between two entities and not through an exchange. The deal is generally facilitated by an agency or broker. Institutional buyers and whales are known to prefer OTC-based trades over the exchanges.
In fact, data reveals that while the trading volumes on the exchanges have dropped since January this year, the OTC trade volumes have grown. Coinbase has possibly taken the decision to enter the OTC market to compensate for the decline in volumes over its exchange.
According to Christine Sandler, the head of institutional sales, institutions were not eager to use the exchange platform. She revealed that the soft launch of the offering started with a small group of clients like asset management firms.
How the OTC Service Works
Customers looking to buy or sell digital assets in large volumes can call Coinbase and ask for the spread. The firm will look for buyers and sellers and provide multiple quotes to the client.
As interest among institutional investors continues to grow, many firms are jumping into the fray. Goldman Sachs-backed Circle has an OTC desk with a minimum entry point of $250,000. Genesis Trading and Gemini are the other alternatives available to U.S.-based customers.
Sandler said:
This is a really opportunistic way for us to counterbalance and offer something that’s different than our exchange trading but offers value to clients in a way that’s really safe.
Currently, the OTC desk is available only to accredited investors on Coinbase Prime, the firm’s platform for institutions. As per company officials, the firm will later introduce the offering on Coinbase Pro, the platform for advanced traders and link it with its custody business as well.
All leading cryptocurrency firms including Coinbase are taking strategic decision to ensure that they stay competitive as the bear market shows no sign of recovering anytime soon.
What are your thoughts on this new offering from Coinbase? Let us know in the comments below.
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