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Is Crypto OTC Trading Still a Profitable and Safe Business?

From Jun. 4 about four thousand bank accounts involved in the money laundering of crypto OTC traders have been frozen by local police in China’s Guangdong province, according to 8btc’s previous report.

How large is the crypto OTC market? Assuming the daily trading volume of cryptocurrency exchange is $10 billion, the global OTC trading volume may be between $15-30 billion (1.5-3 times), according to Bloomberg’s previous report.

Because of this, over 300 cryptocurrency exchanges over the world currently have OTC-related businesses, but is crypto OTC business really profitable?

As many cryptocurrency exchanges in China stop providing transactions after “9.4 ban”, some users who are keen on transactions begin to put the transactions in some QQ chatting groups and WeChat groups, breeding a lot of over-the-counter businesses. People gave prices in the group while looking for buyers or sellers, and the two sides agree to complete the transactions in the witness of the middleman.

In addition, paid services for over-the-counter transactions emerged in some social media groups, a 1% commission for matching a transaction. Later, these middlemen also gradually developed some independent businesses, which are now more well-known OTC bulk businesses. In short, they are matching buyers and sellers in the cryptocurrency world.

But it didn’t last long, because too many cheaters swarmed into those trading groups, cheating some investors, that is, they bought cryptocurrency but didn’t pay.

As a result, the need for a more secure, transparent, and guaranteed crypto OTC platform is urged, which has also opened the prelude for a top-level cryptocurrency exchange to carry out OTC business.

In fact, the OTC business of the exchange is more like a Taobao role, providing a C2C trading platform for businesses and users.

Of course, the profit from OTC business here is not a direct one. For the crypto exchange, it is more about providing access and accumulating users.

As for OTC business, there is an old player – Localbitcoins, which was established in 2012. It is recognized as the world’s largest OTC trading platform and the originator of OTC trading. It could provide bitcoin OTC trading services (including CNY) for users in 248 countries and 7792 cities.

Localbitcoins provides custody or transfer services and draws 1% of handling fee for each transaction. In January 2018, its transaction volume was up to 167.8 million CNY.

There are three crypto OTC trading platforms (OKEx, Huobi, and Binance) that are most used by Chinese traders. The business of the three OTC platforms has also been in fierce competition. As a pre-emptive, Huobi naturally has a larger market and transaction depth, followed by OKEx’s share of the domestic market.

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