And a guide about how to use Project Astral’s OTC Swap!
Over-the-counter (OTC) swaps have been around for decades, but it wasn’t until the advent of cryptocurrencies that they gained widespread attention.
Crypto OTC Swaps or Peer-to-Peer (P2P) Swaps are now a popular way for investors to trade large amounts of cryptocurrency outside of traditional exchanges. In this article, we will explore what OTC Swaps are, how they work, and why they are beneficial for you and any project that utilises it.
What are OTC Swaps?
Over-the-Counter swaps are a type of financial instrument that allows two parties to exchange cryptocurrency without using an exchange. Instead of buying and selling cryptocurrency on an exchange, the two parties agree on the terms of the trade with the use of a special swap protocol. This means that the token sellers can set things like the fixed sell price, the size of the trade, and sometimes the settlement date.
An additional important detail we have to highlight here is the fact that by using OTC Swaps, the traders don’t impact the market price. Buys and sells move the price of the token, when they happen on market swaps like Uniswap. A big sell could potentially have such a large price impact, that the Market Cap falls by 40–70%, if the liquidity is small enough.
Now if these sells happen on OTC Swaps, and not market swaps, the negative price impact of the sell is simply nullified, since the OTC buyers are taking these tokens from the OTC sellers at the same price. If there are multiple big sells planned to happen at a certain price, only the first seller may be able to sell at that price, the following sells may only happen at the price that the first one’s price impact caused (this is why we need to set correct slippage percentage when swapping on the market).
However, due to the nature of OTC Swaps even if there are multiple sells happening at the same price, neither of them will have to suffer from negative price impact and slippage. Moreover, all of them can sell the tokens for a full price, and not a reduced value that is a side effect of the price impact.
Lets see an example, we sell 100,000 Tokens at the price of $0.1 per Token:
A.) The value of this bag is $10,000 as per the price, however, if it’s sold at the market swap the price impact it has on the Liquidity Pool is -30%. Due to this reason, the real value you get upon market sell is only $7,000…
B.) Now we sell the same bag on an OTC Swap. We set the price per Token to be $0.1, and we submit our Token Pool for the buyers. Since this swap happens outside the market, there is no price impact! After one or more OTC buyers buy up your bag, they will all pay a $0.1 price for a Token, and therefore the value you get is $10,000!
As you can see, it is very beneficial to utilise OTC Swaps in a project.
How do OTC Buys work? And why would anyone use them?
Almost all OTC swaps work by having two parties enter into an exchange. The OTC Seller specifies the details of the trade, such as the type of cryptocurrency being exchanged, the price, and the quantity. The OTC Buyers then chose how many tokens they wish to buy from this Token Pool made by the Seller. Once all of the tokens from this pool are bought, this Token Pool closes, and buyers will need to find a new OTC Seller for the same token.
One of the most significant advantages of using a crypto OTC swap is that it can be done quickly and privately. Since the trade takes place outside of an exchange, the two parties can negotiate the terms directly, which can be especially useful for large trades where price slippage can be a concern (see the reasons above).
Additionally, OTC Swaps don’t have extra transaction fee besides the usual gas it takes to trade within a crypto Network like Ethereum. Many Tokens have buy and sell taxes, that traders may prefer to avoid to further reduce their loss at trading the project on the market.
Why the Astral OTC Swap is beneficial for holders?
What Project Astral is doing is simple. In order to trade $ASTRAL tokens on the market, investors will have to pay 0% tax on buys, and 10% tax on sells.
Now this 10% sell tax may seem high for some, but it is there to motivate sellers to sell their tokens via the Astral OTC Swap where they would not only have 0% sell tax, but they would also save the value they would lose on the price impact, if they were to sell on the market.
Buyers of the OTC sellers’ Token Pool not only benefit from it’s stable price, but also the chance to enter the market on a price lower than what it actually is, since a fix priced pool may go for less than the volatile market price. There is no slippage or front-running hazard either that may result in loss of funds! Buyers get what they pay for.
The OTC Swap we use is based on the OTC Swap as a Service built by the KYC’d and Audited Yieldification project.
How to trade with Astral OTC Swap?
In this guide we will go step by step on how to sell and buy tokens via the OTC Swap…
How to sell by creating an OTC Pool?
- Connect wallet and click Create OTC.
2. Now select Astral Pools.
3. Set token to sell (eg. $ASTRAL) and token to receive (eg. $ETH).
4. Set how many ($ASTRAL) tokens you want to sell and enter a fixed price (1 $ASTRAL = ? $ETH).
5. Click Create OTC then approve transaction in your wallet! Congratulations, you successfully created an OTC Pool to sell your tokens for zero tax!
Don’t forget to share it in the social groups so others can buy it from you!
How to buy tokens from OTC Pools?
1: Connect wallet and select Astral Pools and select a pool.
2: Select your token you give ($ETH) and select the token you wish to receive ($ASTRAL).
3: Set how many $ASTRAL tokens you want to buy. Always check the exchange rate!
4: Click on Swap to finish the buy by confirming the transaction!
Congratulations, bought OTC Tokens from others in a safe P2P way, and contributed to the growth of the project!
Learn more about Astral at www.projectastral.xyz!