As per a news agency, Circle which is a service for making instant money transfers executed almost $ 24 billion worth of OTC or over-the-counter trading in 2018. This took place when 600 plus different entities traded with Circle amounting to 10,000 individual OTC trading, generating a whopping amount of $24 billion. Currently, the company stated that it had been the forerunner in providing core liquidity to the entire ecosystem of cryptocurrency. Circle’s over-the-counter (OTC) or off-exchange trading is done directly between two parties, without the supervision of an exchange. It is contrasted with exchange trading, which occurs via exchanges. A stock exchange has the benefit of facilitating liquidity, providing transparency, and maintaining the current market price. In these OTC trades, Circle does not reveal the price to the public which is its main operational secret.
The Circle start-up was launched in 2013 by Jeremy Allaire and Sean Neville. The Circle app is a platform that allows users not only to send and receive money but also stores it as well. In 2015, the Circle company got a Bit License and started operating as a Bitcoin wallet service to trade with cryptocurrency. The main feature of using Circle is that Bitcoin kept in the wallet is insured, so the in case of money being stolen from the user’s account, all the money will be compensated. For this, Circle keeps the equal amount of cryptocurrency on its account to all the Bitcoin stored on the platform. Currently, the Circle finance company uses blockchain technology for not only crypto transactions but for traditional transfers as well.
According to a report, Circle has now been partnering with over 1,000 plus clients who are institutional. These include token projects, exchanges, asset managers, OTC desks and international endowments. The circle is eyeing on further growth this year by adopting more institutions operating on stablecoin. It plans to offer a loan and disbursements in custody solutions for these institutions.
The specialty of Over-the-counter or (OTC) trading is that it significantly allows institutions and investors to proceed with trading directly between the parties without depending on the platform services of the cryptocurrency exchange as the interface.
A cryptocurrency exchange, or a digital currency exchange (DCE), is a web service that provides its customer’s services for the exchange of virtual currency into various assets, such as fiat or other digital currencies. The platforms usually work solely online, providing transactions in electronic forms and taking fees for them, though there are also some brick-and-mortar businesses that use traditional payment methods. Debit and credit cards, postal money orders and other kinds of money transfers are accepted to make an operation using a DCE. Generally, transactions are made between bank accounts and, only in rare cases; a customer can withdraw their money in cash by using special ATMs.
Institutional investors usually operate digital assets trading services over the counter like Circle and Coinbase, and there has been a constant rise in recent years. As per a report dated Dec’17, institutional investors have been migrating slowly to a liquid Bitcoin markets trading in OTC. There has been a sudden upsurge in the investment in OTC funds which are provided by companies like Coinbase and Circle who have been the pioneer in launching OTC system of trading.
Recently, Coinbase performed exceptionally well and left behind Grayscale’s Bitcoin Investment Trust (GBTC) on over-the-counter trading regarding volume. A subsidiary of VanEck, MV Index Solutions which creates, analyses and monitors licenses of MVIS indices have also got into OTC operations off late. Towards the end of last year, MV Index Solutions introduced its index based on Bitcoin which is similar to three major OTC desks operating currently at global levels.