To sell or not to sell, is the ever-present question with crypto, especially when your business needs capital to expand. Combining two financial tools can let you have your cake and eat it too. Over-The-Counter or OTC trading is a staple of cryptocurrency tools. When combined with a cryptocurrency back loan it creates very useful access liquidity to deploy capital and preserve the future value of the crypto.
In this article, we discuss a broad summary of OTC transactions and explain what it is and how we use that service to help miners grow their business. We also introduce Power Block’s OTC service; how it works and how a miner can use it to actually grow their mining business without selling the cryptocurrency position outright or gaining new exposure by converting from cash to cryptocurrency.
Cryptocurrency Commercial Loans and OTC Strategy
One bull market strategy is to convert cash into cryptocurrency via an OTC service. Now, using the cryptocurrency as collateral for a Power Block Loan, the miner can use the cash proceeds to acquire more mining equipment in order to mine more cryptocurrency. Using this strategy, the miner does not have to sell their cryptocurrency to fund expansion. If the cryptocurrency market moves up, then the additional gains from the underlying cryptocurrency are ultimately realized by the miner. Now let us explain how and why.
What is OTC?
In the crypto space, Over-The-Counter transactions facilitate the buying and selling of cash for cryptocurrency and vice versa. The key differences between a centralized exchange-based trade and an OTC transaction lie in the anonymity and planning provided by the OTC transaction. This allows cryptocurrency to be moved without the transaction being disclosed to the public markets mainly to facilitate pricing and liquidity that is least impacted by market volatility.
The Market Size
The exact market size of the of OTC trading is impossible to accurately state. However, according to some estimates, crypto OTC trading currently has larger daily volumes than the major exchanges. For instance, investigators from Digital Assets Research and the TABB Group found that the OTC market facilitated up to $30 billion in trades per day in April 2018 while the exchanges handled about $15 billion in daily trades during the same period.
Arguably, the liquidity on crypto exchanges is often volatile, thus making it difficult to exchange large amounts of cash and or cryptocurrency when required. Centralized exchanges are limited in their ability to fill large transactions on the exchange’s order book. Such orders may be broken up into smaller orders at rates different than the requested price — an unfavourable phenomenon called “price slippage”.
Over-the-counter services eliminate price slippage and, instead, provide liquidity to crypto markets through their own network at a mutually agreed-upon fixed price. Additionally, Power Block OTC services provide regulatory compliant anonymity, which is next to impossible to get on centralized exchanges. For example, if an order of 1,000 BTC were placed on the public exchange it could alert other traders to take positions that could affect the price of the asset. The anonymity offered by an OTC service eliminates such unwanted price movements.
Centralized exchanges also make it difficult to trade larger orders due to the lack of fiat on-ramps or order limits. Most centralized exchanges only allow you to trade a maximum amount of cryptocurrency per day or week forcing customers to split up large transactions overtime to fulfil the entire position. On the other hand, planning an OTC desk can carry out the trade of large amounts without significant complications.
Power Block Coin
Power Block has launched an Over-the-Counter (OTC) Cryptocurrency service, a private, more personalized service that has been requested by many of our institutional, corporate, and large retail clients needing to fill larger transactions.
How it Works
Our global service offers personalized and private OTC services for customers wanting to execute large transactions that would otherwise result in transactions being exposed to risk on the exchange market. OTC trading is available for a wide range of cryptocurrencies and digital assets including, but not limited to Bitcoin, Ethereum, Litecoin, and Ripple.
Power Block begins its process by requiring the completion of KYC/AML documentation. We will provide a price for the sale, or purchase, and then facilitate the transfer of the cryptocurrency.
Bull and bear markets have different strategies. Understanding these strategies for leveraging crypto-backed lending reduces risk and increases returns. Contact us and we will help you to understand these strategies and see if those strategies are the right fit for your mining operations.