A recent conversation shone a new light on over-the-counter, or OTC, bitcoin trading — suggesting much of the large-scale movements between fiat and cryptocurrencies happens away from the exchange books.
Also read: 4 Reasons Why Bitcoin is Outperforming Everything
Entrepreneur and well-known bitcoin investor Vinny Lingham — co-founder and CEO of Civic Technologies, and former CEO of Gyft — highlighted the issue with a blog post on June 27 titled, “The 1% Don’t Use Bitcoin Exchanges.”
Lingham confirmed what anyone who has spent years watching bitcoin already knows: that there are very wealthy people out there investing in bitcoin, and they’re keeping it low-key. Serious money is moving into cryptocurrency.
His main point, however, was that the regular (ie: on-exchange) bitcoin market is simply not large or liquid enough yet to process large trades. To place a seven-figure dollar trade would shift the price in a direction unfavorable to the trader before the trade is completed, a phenomenon known as slippage.
In fact, “regular eight-figure trades are now common” on the OTC market, he wrote. 66 percent of the OTC trade this year has been buyers, and more entered the market after