Top Crypto OTC Trading Surge

Top crypto trading firms have reported a rapid increase in over-the-counter (OTC) trading volumes in recent months, significantly driven by the election outcome.

> “Long story short, OTC is going gangbusters right now,” said Tim Ogilvie, head of institutional at crypto exchange Kraken, in an interview with The Block. He noted that while prices have increased, trading volumes have surged more dramatically.

Ogilvie shared that Kraken’s OTC trading volumes have risen by 220% year-over-year, with similar growth observed at other firms.

Jake Ostrovskis, an OTC trader at market-making firm Wintermute, stated that the market was relatively quiet earlier in the year until prices began to rise as the election approached. This prompted market participants to position themselves strategically. Clients with whom Wintermute had long-term onboarding discussions began to trade, viewing the election results as an opportunity.

Embert Lin, a trader at GSR, confirmed significant volume increases since the election, highlighting a rally in BTC/ETH and altcoins which incentivized projects and investors to manage their treasuries and risk more actively.

A trader from another OTC firm remarked that current trading volumes resemble those during the peak interest in 2021.

BitGo, a crypto custodian, launched an OTC trading desk in the first half of 2024 to leverage increased trading activity following ETF approvals. Brett Reeves, head of Go Network at BitGo, attributed two-thirds of recent volumes to election-related activity, asserting that America’s large market significantly influences growth.

An Increasing Risk Appetite

OTC desks have observed clients moving further along the risk curve. They are beginning to invest in a wider range of cryptocurrencies, provided there is enough liquidity.

Ogilvie mentioned a shift from Bitcoin to Ethereum, Solana, and other altcoins in trading behaviors. He noted that Solana has emerged as a risk asset traded more frequently in recent months.

Ostrovskis identified that Wintermute’s clients focus on crypto assets like Bitcoin, Ether, BNB, Tron, and Aave, primarily due to their liquidity, which institutional clients prioritize.

Lin echoed this statement, indicating that GSR’s clients are seeking exposure beyond Bitcoin and Ether as well.

Expectations for Crypto OTC Trading in 2025

Reeves from BitGo anticipates that demand for OTC trading will persist into the new year, especially for Bitcoin and Ether. He noted that OTC transactions have helped stabilize volatility compared to prior years, particularly due to the establishment of ETFs that bolster crypto’s long-term viability.

Reeves speculated that new ETF opportunities could arise for coins like Solana or XRP.

Ostrovskis pointed out the growing maturity of the derivatives market, as options gain traction among institutions needing hedging strategies. As liquidity constraints grow, institutions may increasingly rely on OTC desks for various products, including options.

He highlighted the introduction of options tied to Bitcoin ETFs as a transformative step leading to more sophisticated market offerings resembling equity markets, thus attracting more capital.

> “It opens up a whole pool of capital there. I think that where that flows into will be interesting,” Ostrovskis concluded.