Definition
OTC in crypto means a trade negotiated directly between two parties, outside a public exchange order book, usually through an OTC desk. The buyer and seller agree a price and size privately, then settle the trade between themselves or through a custodian.
Example
A fund wants to buy a given size of an asset and does not want that order to move the public price. It sends a request for quote (RFQ) to one or more OTC liquidity providers, stating the asset, side and size. Each provider returns a firm price that is valid for a short, stated window. The fund accepts the price it prefers. Both sides record the trade, and the asset and payment are exchanged at settlement.
How Liquid Mercury Handles This
Mercury OTC replaces voice and chat with a fully electronic OTC platform built for institutional trading. It offers RFQ, RFS and streaming quotes around the clock, so a desk can quote and trade without manual steps at each stage.
Definition in detail
"OTC" stands for over-the-counter. In digital assets it describes any trade that is priced and agreed away from a lit exchange order book. Instead of placing an order that every participant can see, a trader asks a counterparty, most often an OTC desk, for a price on a specific size and decides whether to accept it.
Liquid Mercury, the Chicago-based institutional digital asset infrastructure provider, builds the software that lets OTC brokers and desks run this process electronically instead of by voice and chat.
Why traders use OTC
- Block size and market impact. A very large order placed on an order book can move the price against the trader.
- Price certainty. A firm quote fixes the price before the trader commits.
- Privacy. The trade is arranged between counterparties, not broadcast as it works.
OTC vs exchange trading
| Comparison | Exchange trading | OTC trading |
|---|---|---|
| Price formation | Set by the order book, where all bids and offers meet | Set by a quote from a counterparty or desk |
| Size | Limited by the depth of the book at each price | Negotiated for the full size of the trade |
| Counterparty | The market, through the exchange | A named desk, dealer or liquidity provider |
| Settlement | Handled by the exchange | Agreed between the parties, directly or through a custodian |
How an OTC trade works
Electronic OTC trades follow one of three quote models: a request for quote returns one firm price on demand, a request for stream returns a continuously updating price, and streaming publishes prices a client can trade against. The trade then settles, ideally with delivery versus payment. The full flow is in the OTC crypto trading guide.
Risks
OTC trading carries counterparty and settlement risk: the other side may fail to deliver. Credit limits, prefunding and delivery-versus-payment settlement are the usual controls. See counterparty risk in digital asset OTC trading. The BIS Principles for financial market infrastructures discuss settlement and counterparty risk in detail.
Frequently Asked Questions
What is OTC bitcoin trading?
What is the OTC market in crypto?
Is OTC trading good or bad?
How does an OTC trade settle?
Learn More
Where this fits in Liquid Mercury
Electronic RFQ, block execution and settlement for institutional OTC desks.