Buying and selling each asset is done in different ways. Trading of digital currencies is usually done with two methods, OTC and P2P. OTC stands for Over The Counter and means trading outside the exchange, brokerage or broker.
Peer-to-peer (P2P) exchanges occur when two people interact directly with each other to buy or sell digital currency.
A digital currency exchange uses different architectures based on the transaction methods they consider. Of course, many exchanges have provided platforms for conducting transactions with both methods.
These two methods have different specifications; Features that create distinct advantages for owners of different strategies. The great differences between these two methods and the platforms for their implementation have greatly increased the importance of knowing both for traders.
What is a P2P marketplace?
The P2P market is one of the best financial markets in the world of economic trading. In this type of exchange, buyers and sellers register on a site (also known as a P2P exchange, P2P marketplace, or a P2P platform). The transaction process is carried out on this platform under the supervision of the exchange. In all the major exchanges of the world, users are authenticated before starting the activity to eliminate the opportunity for illegal activities.
Advantages of using P2P transaction
P2P cryptocurrency exchanges allow their users to buy or sell their cryptocurrency without the presence of a third party such as a bank. In this platform, users are directly connected through a transparent process. This platform has many advantages. Among these advantages, the following can be mentioned:
Buying and selling with international traders
One of the advantages of using a P2P exchange is access to buyers and sellers of digital currencies in global markets. You can exchange your digital currencies with anyone anywhere in the world in just a few seconds.
Multiple payment methods
In P2P exchanges, many payment options are available to users. The use of fiat currencies, payment through digital currencies or stablecoins are features that are less visible in OTC markets.
Suitable for countries where exchanges are prohibited
Many countries impose strict regulations on cryptocurrency exchanges. Peer-to-peer networks are a good solution for exchanges in these countries.
high security
Peer-to-peer exchanges are very safe due to the elimination of the third party and the possibility of full control of the assets by the user.
A cheaper deal
In P2P transactions, you deal directly with the buyer or seller. Finally, the exchange will charge you a small fee for the platform it has provided for you to perform this transaction. Due to the absence of a third party to perform this transaction, the cost of transactions will be much cheaper.
Convenient access
You don’t need a bank account to buy cryptocurrency on a P2P exchange, which makes this method available to everyone. In fact, you only need an internet connection and a smartphone or computer to transact on most of these platforms.
What is the OTC market?
OTC stands for Over The Counter and means trading outside the exchange, brokerage or broker. In general, OTC transactions are outside the normal buying and selling structure in a market and are conducted directly by two people or two organizations. In other words, the transaction in the OTC market is a transaction that takes place directly between the buyer and the seller without the supervision of exchanges.
OTC trading in the digital currency market
The OTC market is popular for people who want to sell large amounts of coins, such as miners or as an initial investment in a project. On the other hand, some big investors or big investment companies intend to invest in this market, and on the other hand, they don’t want to reveal their identity. Using the OTC Market and buying and selling digital currencies in this way is a suitable platform for these people. The OTC market is very popular in the field of digital currencies. Large exchanges such as Binance and Coinbase have also provided a platform for these types of transactions to meet the needs of their users.
What kind of traders is the OTC market suitable for?
Miners of digital currencies, especially Bitcoin, make up a significant portion of OTC market sellers. Meanwhile, investment funds, legal investors and also large investors are the buyers of these bitcoins.
Miners are not the only players in the OTC market. Research conducted by Reuters shows that wealthy investors, funds and investment companies also make their transactions in this market.
The most important disadvantages of the OTC market
This market is not suitable for traders and non-professionals. The volume of assets that are normally moved in the OTC market is far from the volume of assets of this class of traders. This issue significantly increases the risk of error of this group of activists in this market.
The anonymity of both sides of the transaction in this market provides a good opportunity to conduct transactions with the purpose of money laundering. In recent years, many hackers who have attacked cryptocurrency projects and exchanges have traded the stolen black assets on OTC markets.
OTC or P2P market?
In this article, we have fully reviewed two trading markets, OTC and P2P. We also considered the advantages and disadvantages of these two markets. Both markets can be a suitable option for buying and selling depending on the user’s needs. Finally, depending on your needs in the type of transaction, you can make an accurate choice.
The article A look at the definition of OTC and P2P markets and their differences appeared first on Wallex blog. appeared.
