OTC vs exchange: The real way for Large Investors to make money in encryption.

Seeing Large Investors in the crypto world transferring tens of millions of dollars without any impact on the price? The secret lies in the OTC market.

What is OTC trading

In simple terms, OTC (Over-the-Counter) trading is when buyers and sellers bypass the exchange, negotiating prices and quantities directly through brokers before completing the transaction. There is no public ledger, no order book, and counterparties determine everything through negotiation.

Compared to the traditional financial OTC bond market, crypto OTC is mainly used for:

• Large transactions (single amounts in the millions of USD)
• High-net-worth individuals and institutional investors
• Operations that require privacy protection

OTC vs Exchange: What’s the Difference?

How to Make Money in OTC Trading

1. Market Maker Model

Consider yourself a liquidity provider, placing both buy and sell orders to profit from the bid-ask spread (spread). Large Investors can use OTC to consume the entire order at once and then disperse and sell for arbitrage on the exchange.

2. Cross-Platform Arbitrage

OTC prices vs exchange prices are often inconsistent. Some coins are undervalued in OTC, and smart money buys in at the bottom, turning around to sell on exchanges. This is why you often see certain coins inexplicably soar—Large Investors in OTC have finished accumulating and start pumping on exchanges.

3. Hedging and Risk Management

Institutions lock in the price and time of large transactions through OTC, using futures/options to hedge against volatility risks. Ordinary retail investors cannot manage this level of difficulty.

Pitfalls of OTC

⚠️ Counterparty Risk — In case the other party runs away or goes back on their word, your money may be at risk.

⚠️ Unregulated — It is precisely because of private operations that there are quite a few instances of “black eats black.”

⚠️ Price Opacity — Some OTC brokers deliberately underprice or overprice, profiting from the price difference.

⚠️ Regulatory Compliance — Different countries have varying requirements for OTC, involving KYC/AML reviews.

Why Institutions Prefer OTC

1. Large orders of meal level cannot be listed on the exchange — Once 10 million dollars worth of Bitcoin is listed on the exchange, the price instantly plummets, resulting in a loss.
2. Need for Privacy — Don't want to be monitored
3. Flexible Timing — The exchange operates 24/7, and OTC can customize settlement methods and times.
4. Security — Reduce risk through brokers and third-party escrow.

Insights for Retail Investors

The OTC market is a game played by Large Investors, and retail investors generally cannot participate. However, by using on-chain monitoring tools (such as Whale Alert) to observe large transfers, you can sense the movements of institutions in advance—this is the true source of alpha.

When you see a certain coin suddenly experiencing large OTC trades, and the exchange price subsequently starts to move, this is known as “smart money” operation. Learning to recognize this signal is more effective than any technical indicator.