Bitcoin OTC Brokers: What Are They, How Do They Work, And Should You Use Them

Looking at graphs on a computer monitor.

Learn everything you need to know about trading large amounts of bitcoin over-the-counter using a bitcoin OTC broker.

What is the OTC Market?

A large amount of bitcoin trading occurs on platforms like Binance or Coinbase where the exchanges act as the market makers. They match the buyers (who set the bids) and sellers (who set the asks) on the platform and take a fee for their services.

The OTC market connects buyers and sellers as well, but it does so via bitcoin broker. Bitcoin brokers essentially replace the exchanges as the “market makers”, acting as the new middleman between buyers and sellers.

The OTC market has a niche target that focuses on traders with significant sums of cash who prefer their orders to be filled by one party. The persons seeking a trade will quote prices to their broker, and it’s the job of the OTC broker to connect their client with another trader to complete the transaction.

Apple exchange vs over the counter.

Buyers and sellers communicate through their bitcoin brokers, which helps them remain anonymous throughout the transaction. The majority of OTC transactions involve large sums of money because OTC bitcoin brokers help wealthy traders avoid “slippage”.

Slippage occurs when a buyer places a large order on an exchange, which is then filled by multiple sell orders that can vary slightly in price. The result is an increase in total fees paid and a variance in the price paid for the asset. Direct transactions via OTC markets ensure a singular transaction at an agreed-upon price between the two parties.

What are Bitcoin OTC Brokers?

Gold coin with a bitcoin symbol.

The first thing to know about bitcoin brokers is that they are not financial advisors. Financial advisors form relationships with their clients and usually manage funds on the clients’ behalf. In contrast, OTC brokers typically trade per explicit request from clients and per limits/goals previously established.

The key advantage of trading with a Bitcoin broker is the elimination of any slippage. Bitcoin brokers charge a single fee for their service, but they eliminate excess fees charged by major exchanges when making significant digital asset investments.

OTC brokers develop networks of buyers and sellers to ensure each client’s needs are met. When searching for the right Bitcoin OTC Broker, it’s important to find a firm that has an established network. Doing so will improve the odds of finding the right buyer or seller for any type of trade.

In order to trade via an OTC Broker, investors will have to prove their source of funds and net worth to the firm. Therefore, brokers require clients to complete an identity verification process known as KYC (Know Your Customer), which helps prevent identity theft, money laundering, and other types of fraud.

Why Use a Bitcoin Broker?

OTC brokers are not for everyone. The average investor should find everything they need on popular exchanges like Binance or Coinbase, but for larger investors trading over-the-counter makes sense.

Below is a comprehensive list of pros and cons for those investors considering an OTC Bitcoin Broker.

Pros

Cons

  1. Improved Liquidity
    • Dedicated OTC traders handle large order blocks, thus increasing market liquidity
  2. No Limits
    • Exchanges typically limit daily purchases whereas OTC can reach millions of dollars
  3. Guaranteed Price
    • Lower risk of “slippage”
  4. Fiat Onramp
    • Bitcoin OTC Brokers allow most bank account transfers and sometimes even cash
  5. Anonymity
    • Exchanges post each transaction on the platform while OTC markets offer transaction privacy
  1. Limited Range of Assets
    • Options will be limited unlike exchanges that listed hundreds of altcoins
  2. Requires Significant Capital
    • OTC Bitcoin Brokers normally allow accredited investors or those with proof of capital to utilize their services
  3. Few Trusted Brokers
    • The most difficult part of the OTC purchase process is finding a broker you trust
  4. Manual Trading
    • Exchanges consist of automated trading whereas OTC brokers require ‘manual’ trades over the phone or other online chats

 

Best Bitcoin Brokers

Bitcoin Market Journal has researched and analyzed the top bitcoin OTC brokers to help investors identify the firm that is right for them. If you decide that it’s time to make a substantial investment in digital assets, review our list first to learn everything you need to know about what to look for when choosing the right bitcoin broker for you.

NameDescriptionIncorporation YearFeesAuxiliary ServicesTwitter FollowersRegulatedScore
Circle TradeBoston-based Circle is one of the market leaders in the over-the-counter trade of digital assets. Aside from its OTC brokerage services, the company also offers retail investor solutions through its Circle Invest business and a payments service through its Circle Pay business. 2013Brokerage Fee Included in Agreed PriceAdvisory, Research, Retail Investor Offering, Payments46,700Yes4.5
ItBitNew York-based itBit is a digital currency exchange that launched in 2013. The exchange also offers OTC bitcoin trading service targeted at high net worth individuals and businesses that want to transact in a minimum of 100 bitcoin. itBit charges a 0.1 percent flat fee on each OTC trade and offers same day settlement to its customers. itBit’s OTC trading desk has clients in over 100 countries, and the company is a regulated bitcoin exchange in the State of New York.20120.1 percent per transaction. No crypto withdrawal fees.Full-Service Digital Asset Exchange, All USD Funds Held Are Insured7,825Yes4.5
Genesis TradingNew York-based Genesis Global Trading provides two-sided liquidity for digital currencies on a daily basis. The company was formerly SecondMarket’s Trading Division and is owned by leading bitcoin venture capital firm Digital Currency Group. Genesis has been offering its bitcoin brokerage services since 2013, which makes it one of the longest-standing OTC bitcoin brokers in the market. Due to its ownership by the DCG, it is also considered one of the most reputable.2013Spread Above XBX Bitcoin IndexOut of Hours Trading, Access to Grayscale Investment Trusts, Digital Asset Lending6,425Yes4.5
Cumberland MiningCumberland Mining, a DRW Holdings LLC subsidiary, is another US-based bitcoin broker that transacts in institutional-sized trades. The Chicago-based company provides two-way liquidity in bitcoin and other digital currencies for high net worth individuals and enterprises.1992Brokerage Fee Included in Agreed PriceAdvisory6,112Yes4
Jump TradingChicago-based Jump Trading is one of the newer entrants in the growing Bitcoin OTC brokerage market. The brokerage firm has developed a dashboard for its users that enables investors to traders to interact with Jump Trading’s OTC Desk using a secured connection, which alleviates the reliance on third-party messaging platforms. Its OTC brokerage business executes over $2 billion worth of digital assets each month. 1999Brokerage Fee Included in Agreed PriceAdvisory568Yes3.5
Kraken OTCSan Francisco-based digital asset exchange Kraken launched an OTC trading service in 2018 to enable its professional customers to engage in off-exchange transactions. Additionally, the exchange's OTC trading service includes market analysis, 1-to-1 service, full asset support, and 24/7 global coverage. Minimum transaction size is $100,000. 2011Brokerage Fee Included in Agreed PriceFull-Service Digital Asset Exchange, Market Analysis, 24/7 global coverage376,000No3.5
B2C2London-based B2C2 has been trading since 2015, providing liquidity for large transactions to both individuals and institutions. The minimal settlement amount is $50,000. Clients are able to take advantage of post-trade settlement, allowing them to initiate a trade without depositing any cash. Clients are able to trade gold for bitcoin as well, with a minimum trade size of one ounce.2015Brokerage Fee Included in Agreed PriceAdvisory906Yes3.5
XBTONew York-based XBTO has been providing OTC liquidity since it was founded in 2015. It conducted the first-ever block trade of Bakkt bitcoin futures contracts. XBTO is also involved in crypto mining, using renewable energy to power its operation. In addition to OTC trading, XBTO also provides clearinghouse services via Stablehouse.io for stablecoins.2015Brokerage Fee Included in Agreed PriceAsset Management, Venture Capital, Crypto-Mining, Consulting Services495Yes3.5
BitStocksLondon-based Bitstocks was launched in 2016 to provide bitcoin liquidity to high net worth individuals as well as institutional investors. The company requires you to make a minimum deposit of £5,000 ($6,500) and offers both an OTC brokerage services and an advisory service. For OTC trades, the company’s commission is built into the execution price, similarly to the way Genesis Global Trading handles it. If you want to also benefit from the brokerage’s advisory services, however, you will have to pay a 25 percent performance fee on the profit you make on your trades.2014Brokerage Fee Included in Agreed Price, 25% of Profit on "Advisory" TradesAdvisory & Research1,867No3
Octagon StrategyHong Kong-based Octagon Strategy is an OTC broker, run by former Head of Electronic Trading at Morgan Stanley and Macquaire, Wayne Trench, that claims to be Asia's largest digital asset broker. Minimum trade size is $100,000, and there is no maximum. 2016"Small" transaction fee upon executionRFQ/API, Market Making, Bespoke Services1,145No2.5

Should You Buy Bitcoin Using an OTC Broker?

Investors who want to reap the benefits of OTC bitcoin brokers should first check the balance in their bank accounts before picking up the phone. Brokers require a certain level of cash or volume to justify the investment. Single exchanges, no matter the size, lack the liquidity necessary to fill massive order blocks.

Exchanges fulfill the needs of the typical investor in the vast majority of cases. They offer hundreds of altcoins with different asset pairings, margin trading, automated investing, stop/limit market orders, and, most importantly, investors can purchase fractional shares of coins.

Answering one simple question will, in most cases, reveal whether or not an investor should pursue OTC Bitcoin Brokerage trades: Does your total purchase amount exceed the limits of traditional digital asset exchanges? If so, then you are better off trading with an OTC broker.

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