Goldman Sachs, a prominent US bank, is about to announce and become the first to trade an over-the-counter cryptocurrency transaction.
Goldman launched a new non-deliverable option, a bitcoin-linked instrument, as part of its expansion into the market for digital assets.
Bitcoin-linked instruments were exchanged between Goldman Sachs and Galaxy Digital on Monday.
This is a non-deliverable option, which means the value of the option is related to the price of Bitcoin, but when the option is completed, the holder receives the option’s cash value instead of Bitcoin.
It’s a significant step toward attracting institutional investors to the crypto sector.
The majority of transactions conducted over-the-counter take place via private networks of broker-dealers rather than on a controlled exchange.
OTC trades are viewed as a significant stage in the development of the cryptocurrency market by institutional investors, in part due to their nature.
Over-The-Counter Trading (OTC)
In the context of cryptocurrency, OTC, or Over-The-Counter Trading (OTC), refers to private negotiations for the purchase or sale of crypto. There is no public order book since these transactions do not take place on normal exchanges. Both buyers and sellers benefit from the improved privacy this gives.
Its limited influence on market pricing and relative anonymity is the most appealing features for OTC traders and buyers.
Whales who want to acquire or sell significant sums of cryptocurrency are catered to by OTC. Slippage would have a significant influence on the transaction if these “whales” were to buy a substantial amount of crypto on an exchange.
Because of this, high-net-worth people interested in making significant transactions may choose to consider OTC trading.
More than half of all crypto transactions are conducted secretly, according to estimates.
What is the Process of Over-the-Counter Trading?
In the end, OTC is personal and unique service by design. Crypto buyers and sellers are linked together through OTC Traders.OTCs also keep an inventory of numerous crypto-currencies to match their predicted demand at any particular moment.
It is the job of OTC traders to keep track of who is buying, selling, and when the optimum moment to make a transaction is. When a buy or sell order comes in, the broker will get the crypto or fiat money needed to complete the deal.