From January to September 2020, exchanges operating in Brazil informed the Federal Revenue Service of the movement of no less than BRL 33 billion (USD 6,3 billion). Part of this number refers to crypto asset OTC activity. It is the acronym for over-the-counter or over-the-counter market, in which exchanges, through trading desks, deal with the purchase and sale of large volumes of cryptocurrencies.
In Brazil, there are at least nine large companies with OTC operating desks: Transfero, Foxbit, Novadax, Escher, Nox, Red River, BitBlue, BitPreço, and OWS. Also, major exchanges have OTC areas, even if they do not have the business as a focus.
At Foxbit, OTC accounts for 40% of revenues
The customer base of the OTC desks is diverse: qualified investors, asset intermediation companies, exchanges, and other crypto market companies..
“They are investors seeking diversification, often leaving the traditional market, finishing with financial investments in traditional banks and brokers, and coming to acquire their first bitcoin. This customer profile prefers OTC. Even though there is a minimum purchase of 1 bitcoin, it offers an account manager who can talk to the customer through WhatsApp. Unlike the exchange, where the end customer does everything independently, OTC offers personalized attendance. The customer can work with any cryptocurrency he wishes and build complete portfolios.”, says Foxbit CEO João Canhada, who reveals that the market represents 40% of the company’s revenue.
Novadax to launch automated crypto asset OTC platform
Novadax, an exchange that does not focus on OTC, also offers this option to customers who are approved in their compliance and who want to trade larger crypto-asset volumes. The company is developing an automated platform focused on OTC, to be launched soon. “The idea is to ensure liquidity for this public, with the same security and efficiency that it finds when trading through the exchange book”, says The Director of Business Development, Cesar Trevisan.
Desks see the market in rapid growth
This market volume is still expected to grow significantly, following the rest of the crypto asset market. But it should be driven mainly by the entry of large investors, especially those who operate today in the traditional market. “With the consolidation of bitcoin as a store of value and investment recognized by the traditional market, “private” investors should primarily be the target audience of The OTC desks, working large investments at best possible price”, Canhada predicts.
Bitpreço CEO, Valdiney Pimenta, also sees significant growth ahead, following the rest of the crypto market. “This market is still expected to grow a lot, along with the rest of the crypto asset market. Every day we see more investors and companies interested in cryptocurrencies and the advantages of using them as investments or store of value”, he points out.
Valdiney also highlights the massive migration of the OTC market from bitcoins to tether (USDT), a stablecoin that has its price pegged to the dollar. “Perhaps because it is a simple way to get exposed to a strong and stable currency, avoiding bitcoin swings, and still enjoy the advantages of cryptocurrencies. In Brazil, we see this same movement occurring, a little late, but with volumes of dollar stablecoins growing a lot”, he says.
Self-regulation extends OTC market security
The security of this market has also increased voluntarily. From NovaDax, Trevisan highlights a strong self-regulatory movement in the domestic market, with desks adopting increasingly rigid procedures and measures of KYC/KYT/AML, and increasingly professional players in the market, following trends in the international market.
Canhada says that although Foxbit was the first OTC desk in Brazil, he still sees room for improvement. “We already have a personalized service, and we build cryptocurrency portfolios on-demand from customers. I know we can, and we are going to do more! We already have the best wholesale price, and we are the only one that in addition to teaching the customer on how to perform custody, we send a ledger to customers who buy high volumes”, he highlights.