Coinbase today launches its OTC trading desk for its institutional Prime clients. The integration of delayed processing and Coinbase Custody is planned. This will reduce the cost of acquiring crypto – currencies for institutions and overall market volatility.
Over-the-counter (OTC) trading does not take place on the stock exchange but directly between the trading partners. Many institutions (as well as whales) use OTC as a mechanism to reduce slip – ups to prevent scalping, front run and other volume losses.
Christine Sandler, Coinbase sales manager, described the move as “opportunity” and a response to customer demand. Sandler also points out that Coinbase is launching a service to beat Poloniex and Gemini rivals.
In February, Circle Trade acquired its OTC services, while Gemini OTC was launched by Winklevoss in April. Contrary to the competitors of Coinbase, Coinbase will not only “trade on a proprietary basis” but also “match customer orders.” This is good for service users, leading to lower fees and lower settlement times.
According to Sandler, the service would allow trades to settle “seamlessly and immediately” with funds available for “immediate withdrawal” and “no opportunity for a failed trade” and “no need to chase cables and blockchain transfers.”
In addition, Sandler argues that this does not only affect institutional users. All Coinbase customers and more widely the cryptocurrency markets could potentially benefit from lower volatility. Coinbase also launched its own stable coin, USDC, in competition with Tether, True USD and USD Coin, in another daring move. Speaking of its success, Sandler said that USDC is “one of the most liquid stable coins currently trading,” and spoke more broadly about its impact on the markets:
“When you think about volatility you think about the complement of how do you mitigate that volatility for users of cryptocurrency. And, a stable coin absolutely does that [mitigates volatility].”
Speaking of the recent downturn in the market, Sandler also says there’s an upside. Institutions may think that this is an excellent chance to enter at a lower price:
“There is one upside to the recent volatility, that crypto has been front and center to the mainstream media, and that has driven a lot of institutions to think whether this is an opportunistic investment point.”
Regardless of market conditions, progress by Coinbase helps to provide everyone with cryptocurrency. Widespread and easier access could have huge consequences. As Sandler put it eloquently:
“The opportunity for us to offer and have financial services for the unbanked globally is really coming alive.”
