How a crypto OTC trade actually closes

Most large digital-asset trades never touch a public order book. They are agreed bilaterally, priced off an index, and settled in tranches between two principals who have never met. That structure protects both sides from slippage and from signalling, but it puts the entire burden of trust on the procedure itself.

Below is what a working procedure looks like once you strip out the theatre.

1. Establish that both sides are real

Before any price is discussed, each side has to prove the two things the other actually cares about: that the coins exist and are controlled by the seller, and that the money exists and is unencumbered.

• Proof of funds. A recent bank statement, a custodian attestation, or an on-chain balance for stablecoin buyers. Screenshots are worthless; a signed statement or a read-only exchange API key is not.
• Proof of control. A message signed with the private key of the address holding the assets, or a small transfer executed on request. A balance alone proves nothing about who can move it.

The single most common cause of a dead deal is a seller who can show a balance but cannot sign for it.

2. Fix the commercial terms in writing

Index reference, discount or premium, tranche size, settlement asset, network, and who pays the network fee. Four lines of text prevent four weeks of argument. If the trade is intermediated, the fee protection agreement is signed here — not after the first tranche has moved.

3. Settle in tranches, smallest first

The first tranche is not about volume, it is about proving the pipe works. A trivial test transfer confirms addresses, network, and compliance screening on both ends. Only then does tranche size ramp.

1. Test transfer, both directions, nominal amount.
2. First commercial tranche, typically 1–5% of the total.
3. Ramp on a pre-agreed schedule, with a fixed confirmation window between tranches.
4. Repeat until the block is complete, repricing at each tranche if the term sheet says so.

Two conventions dominate the market. In the first, the coin side moves first in each tranche after the cash side has demonstrated control of its funds. In the second, the cash side moves first after the coin side has signed for its wallet. Neither is inherently safer — what matters is that the sequence is written down before the first transfer, and never renegotiated mid-block.

4. Use an escrow only where it changes the risk

Escrow agents add cost and a third point of failure. They earn their fee when the tranche size is large relative to the relationship, when the two sides are in jurisdictions with no practical legal recourse against each other, or when a broker chain needs its commission secured independently of the principals.

5. Keep the paperwork proportionate

Full sale and purchase agreements are common in commodities and rare in liquid crypto blocks, where most desks work from a short term sheet plus compliance files. Insisting on a heavy contract set for a routine block is a reliable way to signal that you have not done one before.

What actually kills deals

• Assets sitting on an exchange account with withdrawal limits below the tranche size.
• A "seller" who is in fact the fourth broker in a chain and has never spoken to the principal.
• Compliance screening applied after the funds move rather than before.
• Procedures that are incompatible from the start — one side only settles buyer-first, the other only seller-first, and nobody checked.

That last point is the entire reason a counterparty database is worth anything: matching on procedure is as important as matching on size and price.