Knowledge Base

What’s the Difference Between OTC and Exchange?

September 12, 2018

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What’s the Difference Between OTC and Exchange?

A cryptocurrency OTC marketplace and a cryptocurrency exchange are two of the most common ways to purchase bitcoin and other cryptocurrencies (altcoins). However, both trading platforms have unique features that set them apart from each other and before deciding on the method to use, it is important to know which platform works best for which trades. Here are the major differences between OTC and exchange:

What is a Cryptocurrency OTC Market?

A cryptocurrency OTC (over-the-counter) market is a peer-to-peer platform where traders use fiat currency (Dollars, Pounds, Euros, Yuan, Yen, and so on) to buy/sell cryptocurrencies. Here is how CoinCola’s OTC marketplace works:

Traders who want to sell cryptocurrency can post trade advertisements specifying the coin they’re selling, together with: the price they’re willing to sell at, the minimum and maximum trade amounts and preferred payment methods. Buyers—with fiat—connect with sellers that have the amount of cryptocurrency that they need, at a price they’re willing to pay.

Once both parties agree to a deal, the crypto funds are secured using an online trade escrow. As soon as the seller confirms that they have received the agreed upon amount in fiat, the cryptocurrency is released to the buyer and the trade is complete. Traders looking to buy cryptocurrency can also post trade advertisements specifying the type of cryptocurrency they want to receive and the price they’re selling at.

For services provided, CoinCola charges a fee of 0.7% for every completed transaction. Only users who post a buy or sell advertisement and complete a trade are charged. There is no charge to buy or sell, otherwise.

 

What is a Cryptocurrency Exchange?

A cryptocurrency exchange is a platform that gives users an opportunity to diversify their portfolio and exchange one cryptocurrency for another based on current market prices. Cryptocurrency exchanges and stock exchanges are similar in that current prices are determined by market demand and supply. On CoinCola, the base currencies are bitcoin (BTC) and tether (USDT), and traders can exchange these for ether (ETH), litecoin (LTC), or bitcoin cash (BCH). To trade cryptocurrencies on the CoinCola exchange, traders are charged a fee of only 0.2% of the amount exchanged.

In addition to diversifying your portfolio, CoinCola’s exchange also gives investors the opportunity to trade one cryptocurrency against another and make profits off price movements. For example, if an investor wants to purchase ether (ETH), they can either choose to do so with bitcoin (BTC) or with fiat. Assuming now that bitcoin’s price (in dollars) grows by 10% in comparison to the price of ETH (also in dollars), trading BTC for ETH results in 10% more ether than if the trade had been completed using dollars. Additionally, if the % rise in price of ETH exceeds that of bitcoin in the nearest future, it makes the trade even more profitable.

I that need to buy/sell cryptocurrencies urgently and do not mind doing so at market rates can place a market order; this option works best when you need a particular quantity quickly and you don’t mind paying more for it. For cases where there is no time constraint, investors may use limit orders to set minimum or maximum buy/sell orders. In this case, as long as the market allows it, you trade at the prices that suit you. However, it may take long to find trades that meet your specifications and your order may not be completely filled as a result of market conditions at the time.

See also: What’s the difference between a market order and a limit order?