What’s Crypto OTC Trading?
Introduction in OTC Trading
OTC Trading (Over-the-Counter) means trading without using an exchange. The buyer or seller may create an offer on the OTC platform or apply for the interesting offer.
The OTC platform plays the role of escrow and charges a fee for these services. OTC trading has long been a common practice for traditional financial markets and in recent years has gained popularity in the cryptocurrency markets. The Localbitcoins website was the first OTC platform for trading Bitcoin. It still retains great popularity, but because of the high escrow fee, people are turning to other OTC platforms with lower fees, such as CoinCola.com.
Why do people use OTC platforms
Most of the cryptocurrency exchanges do not accept fiat money (national currencies like USD, EUR, CNY, etc). And even if some of them do, it is usually only for USD from the bank account. OTC platforms make it possible to buy cryptocurrency using a wide range of payment methods, for example, bank accounts with local fiat currency (USD, EUR, GBP, CNY, JPY, etc), Alipay, WeChat pay, PayPal, MoneyGram, Western Union, Kakao Pay , Payeer or even cash in person in your city. At some OTC platforms it is even possible to trade Bitcoins and other crypto for the gift cards, for example Amazon Gift Card or iTunes Gift Card.
Choosing the OTC platform
There are four main criteria by which people choose the OTC platform:
- Reliability. It is necessary to study the reviews about the OTC platform and to make sure that it is not a scam; that users do not complain about the lost funds or the difficulty of the cryptocurrency withdrawing.
- Escrow fee. Different OTC platforms have different fees for escrow and for withdrawing cryptocurrency from the OTC platform. For example, if you place an offer about buying or selling Bitcoins on Localbitcoins, a 1% fee of the transaction volume for every completed trade should be paid from your side.
- Payment methods. Choose the OTC platform that has the most convenient payment method for you.
- Liquidity. There must be a sufficiently large number of users on the OTC platform so that you can match your order in a reasonable time. On the unpopular OTC platform, your order with a good market price can stay unanswered for many days simply because there is no one to read it.
How to trade OTC using CoinCola.com
Let us consider the trading algorithm on the CoinCola OTC platform on the example of buying and selling one (1) Bitcoin for USD.
- Buying one Bitcoin for USD
This is a fairly simple deal, in which you should not be afraid of fraud from the Bitcoin seller because CoinCola acts as an escrow.
The sequence of actions is as follows:
- You choose the Payment method (National bank transfer) and fiat currency – USD.
- In the list of offers choose the most suitable for the price and terms of the deal.
- Submit an application that you want to buy one Bitcoin using this offer. Seller’s one Bitcoin is blocked in escrow due to this deal.
- You discuss deal details with the Bitcoin seller. If you come to an agreement with the seller, you will receive payment details from him, then make the payment and signal the seller that the payment has been made.
- The seller checks that the right USD amount has come to his bank account, and confirms this using CoinCola user interface, after which one Bitcoin is automatically transferring from the escrow to your OTC wallet.
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- Selling one Bitcoin for USD
The sequence of actions is similar, but there is a very important difference. A transaction in the Bitcoin network cannot be canceled or changed, so if you received Bitcoin, then no one can take it from you. The only exception is hacking your computer and stealing the private key if you do not use a hardware wallet. But almost all fiat currency transfers can be canceled or disputed, even months after the transaction. Therefore you should be very careful when selling Bitcoins: choose a seller attentively and use those payment methods where it is most difficult or impossible for a possible swindler to cancel a transfer.
Also when you sell Bitcoin it is necessary to double check that you got fiat money exactly at your personal account because scammers can send a fake money transfer confirmation to your e-mail or send you some photoshopped proof of payment.
If the buyer transferred the money but the seller for some reason does not want to confirm the money arrival, a controversial situation arises in which the representative of CoinCola.com acts as an arbitrator. He carefully studies the transactions, verifies the evidence from both sides and makes a fair decision about who should get the money.
How to withdraw money or crypto from OTC platforms
Cryptocurrency withdrawal from the OTC platform is the easiest part. You just have to enter your OTC wallet using an OTC platform website, find the cryptocurrency you want to withdraw, and click the “Withdraw” button in front of it. Then enter the address where you want to transfer funds, enter the password and click “Confirm withdraw”. When withdrawing from an OTC wallet to your external personal wallet a small fee will be taken, for example, 0.0005 BTC when withdrawing BTC from CoinCola.com. Fiat currencies do not need to be put on OTC platforms for buying/selling any cryptocurrencies.
