In the world of cryptocurrency, Over-The-Counter (OTC) trading plays a crucial role, especially for high-volume transactions. OTC trading allows buyers and sellers to conduct transactions directly, bypassing traditional exchanges. This method offers privacy, reduces the risk of price slippage, and enables the handling of large transactions. In this article, we’ll explore how crypto-OTC trading works and the procedures that are generally followed.
How Crypto-OTC Works
OTC trading involves a direct transaction between two parties, typically facilitated by a broker or an intermediary platform like CryptoConnect. Unlike traditional exchanges, OTC trades do not appear on the public order book, ensuring privacy and discretion for both parties.
Common Procedures in Crypto-OTC Trading
1. Satoshi First Method
One of the most reliable methods in crypto-OTC trading is the “Satoshi First” method. Here’s how it typically works:
- Step 1: Proof of Funds (PoF): The buyer provides a small amount of BTC, often referred to as “Satoshi,” to prove they have the funds.
- Step 2: USDT Transfer: The seller sends USDT (Tether) to the buyer.
- Step 3: BTC Transfer: After confirming the USDT receipt, the buyer sends the agreed amount of BTC.
- Step 4: Repetition: This process is repeated in tranches until the entire transaction is completed.
This method ensures that both parties can trust each other by starting with small, manageable amounts.
2. Nshake Method
Another effective method is the “Nshake” method, which includes a Proof of Control. Here’s how it works:
- Step 1: Proof of Control (PoC): The seller sends a small amount of USDT to the buyer to demonstrate control over the funds.
- Step 2: Nshake Process: After confirming the USDT receipt, the buyer sends BTC first.
- Step 3: USDT Payment: The seller then sends the corresponding USDT for the tranche of BTC received.
- Step 4: Repetition: The process is repeated in tranches until the transaction is fully executed.
The Nshake method adds an extra layer of security by ensuring that the seller has control over the USDT before the BTC is sent.
Additional Considerations
While these methods are widely used, the specifics of each transaction can vary. Here are some additional considerations:
- Confidentiality Agreements: Most transactions do not require a Sales & Purchase Agreement (SPA) or an International Monetary Fund Purchase Agreement (IMFPA) due to confidentiality concerns. However, in some cases, the buyer and seller might agree to exchange Client Information Sheets (CIS) and set up an SPA and IMFPA before beginning the tranches.
- Flexibility: The need for formal agreements can depend on the preferences of the buyer and seller. Flexibility and clear communication are key to ensuring smooth transactions.
Conclusion
Crypto-OTC trading offers a discreet and efficient way to conduct high-volume transactions. Understanding and following the common procedures, such as the Satoshi First and Nshake methods, can help ensure that transactions are secure and trustworthy. At CryptoConnect, we facilitate these transactions, providing a reliable platform for buyers and sellers to connect and trade with confidence.
By following these best practices, participants in the crypto-OTC market can navigate transactions smoothly, ensuring security and efficiency in every trade.
