Institutional Crypto OTC Trading Evolves into Comprehensive Market Infrastructure Layer
Crypto over-the-counter (OTC) trading has evolved significantly since its inception. The primary use case for OTC was to facilitate large orders without moving the market on public exchanges. However, as institutional participation in crypto markets grew, so did the complexity of OTC trading.
Today, OTC is no longer just about executing a large block away from a public order book. It has become an integral part of the broader trading and settlement infrastructure layer for institutions. A firm client quote does not necessarily mean that the desk executes everything in one place; pricing and hedging may draw on liquidity across multiple venues.
The original OTC problem still exists, large market orders can consume several price levels in the order book, resulting in poor average fill prices. An OTC workflow changes the client experience by allowing a defined size to be quoted for a transaction, with the desk managing its own inventory and sourcing liquidity accordingly.