Category Archives: Circle Trade

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Coinbase Launches OTC Trading for Institutional Clients

Media outlet Cheddar has reported that major US-based cryptocurrency exchange Coinbase has launched an over-the-counter (OTC) cryptocurrency trading desk.

This move has been described as “opportunistic” since they were “reacting to client demand” geared towards broadening its customer base to include more institutional clients. Nevertheless, plans had been in motion since June and had only been waiting for a regulatory license, which Coinbase President and COO Asiff Hirji clarified that it would help the firm offer future services that include OTC trading.

OTC trading attracts large investors mostly classed as institutional investors, such as investment banks. These transaction types take place between two traders directly without the presence of a third-party order matching-system like regular cryptocurrency exchanges.

The service is currently available to Coinbase Prime customers, a service which was also launched to lure institutional investors such as cryptocurrency hedge funds that control large amounts of funds. Prime has sophisticated trading tools and was initially designed to also include OTC trading.

Coinbase’s head of sales Christine Sandler pointed out in the interview that the service was launched as a complementary service to its exchange business, noting that institutions were using OTC as an “on-ramp for cryptocurrency trading”. This she said is an opportunity for their clients to benefit by leveraging both the exchange and the OTC business.

In comparison, Sandler described Coinbase’s OTC agency as a platform that matches client orders directly, as opposed to Circle’s and other similar OTC services where such platforms trade on a “propriety basis” and are “counterparties to each transaction”.

Circle’s version of the OTC desk, referred to as Circle Trade, has a minimum ticket size of USD 250,000 for both individual and institutional investors.

Moving forward, Sandler said plans are in motion to expand the OTC service to include delayed settlement and possibly integrating with its Custody Solution as well. Launched in July, Custody Solution is Coinbase’s platform for hedge funds, exchanges and ICO teams.

On the subject of volatility, Sandler said that the stablecoin launch for all their clients about a month ago is one of the things they are “really excited about”, noting that USDC is “one of the most liquid stablecoins” trading right now and that stablecoins help mitigate against volatility.

 

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Winklevoss’s Gemini Integrates Block Trading for Crypto Whales

Trading platform Gemini, founded by the Winklevoss twins, announced Monday the introduction of block trading, with the goal of facilitating trades for those looking to exchange large sums of cryptocurrency.

As more institutional traders enter the market, publicly-open trading exchanges are not equipped to facilitate their substantial currency transactions and are extremely sensitive to high-value trades that take place.

The Winklevoss twins are looking to cater to the growing number of investors and hedge fund managers utilizing the cryptocurrency market while proving that block trading can potentially be conducted without destabilizing the market.

Block trading

Most exchanges maintain a central limit order book that keeps all transactions under a certain size, restricting trades to reflect the demand for the particular currency at the time. These limitations are there to prevent retail traders reacting to false signals of market movements that larger trades would create.

Block trading is utilized to overcome these restrictions, with larger trades that exceed the limitations being settled privately between the involved parties. A post on the Gemini blog lays out the conditions necessary for block trades to take place on the platform: “Any customer can place a block order that specifies: (i) buy or sell, (ii) quantity, (iii) minimum required fill quantity, and (iv) a price limit (the “Indication of Interest”)”.

The block trading orders will take place outside of Gemini’s continuous order books, with the pending transaction only successful if “a market maker agrees to “make a market” that satisfies the Indication of Interest”. There is a minimum investment of 10 BTC or 100 ETH to participate in block trades.

Gemini’s block trading service will go live on 12 April at 9.30am (EST). The exchange platform aims to publish confirmed trade information on its data feed within 10 minutes of being finalized. Block trading has the potential to reduce market volatility caused by cryptocurrency “whales” (the term given to large-volume traders) selling off large portions of their assets.

A recent substantial sell-off by a trader using the handle Mt. Gox, is reported to have influenced Bitcoin’s recent crash that reached nearly USD 6,000. Other platforms have already adopted block trading, most notably gaining popularity in Asian-based exchanges. Circle Trade is one such platform already utilizing block trading, with its website citing it is currently moving USD 2 billion a month.

Block trading companies have recently gained massive popularity in Asian trading hubs such as Hong Kong and also in Australia. With significant financial players including the Rothschilds, the Rockefellers and George Soros entering the cryptocurrency market, block trading is going to be a necessary adoption for all platforms looking to cater to these investors.

 

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