Physics gets weird when things are very large or very small. Financial markets operate in much the same way. For that reason, big cryptocurrency players — hereafter called whales — rely on over-the-counter OTC markets to book their big buys.
What whales do under the surface, however, can create very noticeable and notable ripples in the general market. By its nature, the value of different cryptocurrencies can vary widely. A popular exchange like Binance or Kucoin lists individual coins that cost fractions of a cent and coins that cost thousands of dollars apiece. This is the visible market the majority of crypto players are most familiar with.
Liquidity in that market is restricted by the number of individuals participating in the market at any one time. Moreover, if that big buyer announces the intention to buy all the jade trinkets currently available, the price of those trinkets is going to skyrocket.
If that same player arrives with a bag of trinkets and announces the intention to dump them all as soon as possible, the price will drop. This phenomenon is known as slippage. Whales in Cryptocurrency. OTC providers can take the form of institutions, private traders, or brokers. Imagine a waiter steadying a table in the galley of a rolling ship while the two players dine.
The way the rich buy cryptocurrency is no different. But like the infamous trickle-down economic theory, what whales do behind the scenes can have a direct impact on the common market. Market cap is probably the most visible example. Much of that market cap was injected by large buyers — some of them governmental entities, like China — without disturbing the day-to-day market. As a result, the liquidity of the day-to-day market has gone up significantly, which allows smaller but still significant buyers to enter the market without making waves.
The whales paved the way for dolphins to play among the minnows, in other words. The whales also provided a hidden support system for prices. Without much fanfare in the open market, large, established projects like Bitcoin found themselves underpinned by large sums of liquid cash.
This kept the coins from tanking when exchange volume got lackluster and gave credence to the idea that big money, of some kind, was betting that cryptocurrency had a future. The mechanics of OTC transactions are relatively straightforward. The OTC provider learns exactly how much currency is at stake and identifies a counterparty for the trade. On an exchange, this process is mediated by the exchange itself.
Offers are exchanged and, once agreed upon, the OTC provider goes to work. The accompanying due diligence matters are resolved per U. If you are or aspire to be a whale, you probably already know it. You are also probably already aware of your options. If you are a whale, then you have the power to make or break markets. This can lead to unforeseen and otherwise consequences, like a pump-and-dump.
For the 99 percent of crypto buyers who know they are not whales, whale-watching is probably at least as useful as refreshing Coinmarketcap. Probably even more so. If the whole point of using an OTC market is to keep big buys from immediately shaking up the market, what does whale-watching entail?
Keeping an eye on the total market cap is a useful indicator that whales are on the move. Increases in market cap tend to be tied to specific events — a new exchange listing, a roadmap release, something concrete. OTC transactions take time, unlike the click-and-buy nature of exchanges. This is something that is unique to the Blockchain, in what other asset class could you see exactly how much individuals are holding?
The regular economy is shadowed by an equally large and complex paper market, comprising a shadowy maze of futures, derivatives, and other financial tools. At some level, every consumer knows that the price Wal-Mart gets for apples beats any price he or she could negotiate alone. This is partly to enjoy economies of scale and partly to keep a modicum of control over the market.
After all, if you were to learn that Wal-Mart had purchased every available apple in the U. Large cryptocurrency transactions are frequently conducted via OTC providers that keep their whale clients from disturbing and being disturbed by the market while they go about their business.
The effects of whale movement, however, are important to the market as a whole and a useful barometer for the minnow-sized investor. Recognizing whale movement in key currencies and the market as a whole can provide a weather map for changes ahead or direction in general. No Spam, ever. All content on Blockonomi. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate.
Lots of crazy statements here without any sources or evidence to back them up. Your email address will not be published. Notify me of follow-up comments by email.
Notify me of new posts by email. You should consider whether you can afford to take the high risk of losing your money. Related Articles. Show comments Hide comments. One Comment Fred Vold July 29, at am. Leave a reply Cancel reply Your email address will not be published.
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Emilio Janus Dec 19, While volume on centralized exchanges is down as a whole, Bitcoin OTC over-the-counter markets have seen a surge in buyers leading to a shortage of sellers, according to the latest data from Diar. This may suggest that institutional investors are quietly stocking up on bitcoin while looking to keep prices low for the time. Most pundits expect institutional investors to create the catalyst ottc the next cryptocurrency bull-run. But research shows institutional trading losing softwars in volumes on traditional exchanges this otc bitcoin trading software. However, Rtading markets have seen an exponential increase in buyers leading to a dearth of sellers. While saw roughly equal trading volumes between the two, this year, especially the past few months, has witnessed a divergence in trends.
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The marketplace is located in bitcoin-otc channel on the freenode IRC network. If you don't have an IRC client, click here to visit the otc bitcoin trading software with your web browser. All transactions that may occur are conducted directly between counterparties, without any participation or intermediation from bitcoin-otc. As such, it is each individual's responsibility to conduct due diligence on their counterparties, and otherwise act in a prudent way to avoid falling prey to fraudulent users.
It is strongly recommended that all users review the guide to using bitcoin-otcwhich contains a non-exhaustive list of suggestions for safe conduct on bitcoin-otc. The OTC web of trust is not foolproof. Do not rely on the ratings blindly - since the cost of entry into the web of trust is only one positive rating, it is not impossible for a scammer to infiltrate the system, and then create a bunch of bogus accounts who all inter-rate each.
Talk to people on bitcoin-otc first, make sure they are familiar with the person you're about to trade with, have traded with him successfully in the past. Visit our sponsors:. Currency ticker.
A guide to using bitcoin-otc. A must-read for all users: how to use the order book, and how to stay safe while conducting OTC transactions. Due to the p2p nature of OTC transactions, you are exposed to counterparty risk.
To mitigate this risk, you need to have access to your counterparty's reputation and trade history. This is precisely the kind of information that the OTC web of trust provides. Disclaimers bitcoin-otc is merely an aggregator of outstanding supply and demand. Feel free to grab it from this github git repository. Improvements and contributions are welcome. If you would like to post questions or bug reports, please use the issues tracker on github for this repository.
After all, if you were to learn that Wal-Mart had purchased every available apple in the U. Tim Falk is a freelance writer for Finder, writing across a diverse range of topics. Formerly floor traders at the CME. What exactly is the OTC market? External what does this mean? Tim Falk. Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve. The system is responsible for verifying the identity automatically. The next step is to negotiate the terms of the trade. Co-Founder: Joshua Ho. Thank you for your feedback. There are lots of scary reviews and news of Private OTC deals gone array, We will post some of those links below, but because otv is a global and rather decentralized market place, with regulations just starting to come into play .