Over-the-counter (OTC) desks performed an important position in stabilizing buying and selling in the course of the current crypto market crash by appearing as shock absorbers that contained volatility and restricted broader systemic dangers, based on a word from Finery Markets, a number one crypto ECN and buying and selling SaaS supplier ranked among the many high 30 digital asset corporations globally.
On Friday, bitcoin , the main cryptocurrency by market worth, plunged from round $122,000 to $103,000, with a lot of the losses occurring within the late hours. The broader market wilted, marked large losses in different cryptocurrencies and volatility in in any other case secure cryptocurrencies akin to Ethena’s artificial greenback USDe, Wrapped Beacon Ether (wBETH) and Binance Staked SOL (BNSOL).
USDe briefly crashed as little as 65 cents on Binance, largely as a result of alternate’s personal inefficiencies, whereas it held regular on different, extra liquid avenues like Curve, Fluid, and Bybit.
In accordance with Finery Markets, the localized disaster may have unfold had it not been for OTC desks appearing as shock absorbers.
“The disaster underscored the worth of secondary buying and selling carried out by way of OTC non-public rooms. This infrastructure acts as a firewall towards systemic contagion as a result of basic distinction so as e-book construction,” the agency stated in a report shared with CoinDesk.
The agency defined that, not like centralized avenues like Binance, which depend on central, seen liquidity, OTC desks supply a singular non-public setting with off-screen liquidity tailor-made to every participant.
“[This] darkish liquidity considerably reduces the unfold of systemic danger,” the agency stated, including that personal rooms may also help keep away from bank-run-like dynamics brought on by seen panic in public order books.
OTC desks and centralized exchanges differ in how they supply liquidity and execute trades. On OTC desks, buying and selling occurs privately between consumers and sellers or by way of non-public liquidity swimming pools. Establishments and enormous merchants sometimes transact over OTC desks to keep away from impacting the going market charge of the asset.
Centralized exchanges function with clear order books the place all contributors can see accessible purchase and promote orders, creating seen liquidity but in addition exposing the market to speedy, panic-driven volatility.
Quantity Surge on Finery
The institutional flight to stability in the course of the main liquidation occasion from October 10-12 is clear within the surge of buying and selling quantity inside Finery Markets’ non-public buying and selling rooms.
Week-on-week, quantity in BTC/USDT and ETH/USDT pairs on these non-public rooms elevated by 107%, considerably outpacing the 48% progress seen on centralized platforms. Concurrently, bid-ask spreads, a key indicator of liquidity, narrowed sharply on Finery’s OTC venues, reflecting improved market depth and stability.
The chart reveals that bid-ask spreads for 0.01 BTC on Finery had been considerably narrower than these on main centralized exchanges like Coinbase, Bitstamp, Kraken, and Binance.
In different phrases, executing giant trades was simpler on Finery than on different avenues.
