Over-the-counter (OTC) desks play an important role in stabilizing trading during recent crypto market crashes by acting as shock absorbers containing volatility and limited greater systematic risk, according to a note from the finery markets, a leading crypto ECN and trading in the provider of provider Top 30 digital asset companies in the world.
On Friday, the Bitcoin the leading cryptocurrency by market value, Retrieved from around $ 122,000 to $ 103,000, with most losses occurring in the final hours. The broader market is missing, marked massive losses in alternative cryptocurrencies and volatility in otherwise stable cryptocurrencies such as the synthetic dollars of Ethena, wrapped in the Beacon Ether (WBeth) and Binance staked Sol (BNSOL).
USDE briefly crashed less than 65 cents to Binance, mainly due to exchange own futilityWhile it is held firmly to others, more liquid avenues such as curve, liquid, and bybit.
According to Finery Markets, the localized crisis can spread if it is not for OTC desks acting as shock absorption.
“The crisis emphasizes the value of the second trade conducted through the OTC’s private rooms. This infrastructure acts as a firewall against the systemic contagion due to the major difference in the conference of the book structure,” the company said in a report shared with CoinDesk.
The firm explained that, unlike centralized avenues such as Binance, which relies on middle, visible liquidity, OTCs offer a unique private environment with off-screen liquidity corresponding to each participant.
“(This) Dark liquidity significantly reduces the spread of systematic risk,” said the firm, adding that private rooms will help prevent dynamics such as bank caused by visible panic in public order books.
OTCs of OTC and centralized exchanges are different from how they provide liquidity and carry out trading. At OTC desks, trade occurs privately between buyers and sellers or through private pools. Institutions and large entrepreneurs generally transact OTCs to OTC to avoid the impact on going to the rate of the owner market.
Centralized exchanges operate on transparent order books where all participants will see available orders to buy and sell orders, creating visible liquidity but also exposes the market to fast, panic-driven volatility.
Volume of surge to finery
The institutional flight to stability during the main extermination event from October 10-12 is apparent in the advancement of trading volume within private tradery market trade rooms.
Week-on-week, volume in pairs of BTC/USDT and ETH/USDT in these private rooms increased by 107%, significantly exceeding the 48% growth seen on centralized platforms. At the same time, the bid-ask, a key indicator of liquidity, is narrowed in the OTC arery areas, reflecting the enhanced depth and stability of the market.
The chart shows that the bid-ask spread for 0.01 BTC in finery is significantly narrower than those in the major centralized exchanges such as Coinbase, Bitstamp, Kraken, and Binance.
In other words, implementing large trade is easier on finery than other avenues.
