Established in 2013, Boston-based payments technology firm, Circle Internet Financial has reportedly facilitated the trade of about $24 billion in digital currency through its over-the-counter (OTC) trading platform.
An official blog post published on January 3rd, 2019 by Circle noted that the global internet finance company helped process over 10,000 OTC trades “across 36 different cryptoassets” with “nearly 600 distinct counterparties.” In total, these trades generated almost $24 billion in “notional volume.” According to Circle’s co-founders, Sean Neville and Jeremy Allaire, the developer of digital currency products has “become a core liquidity provider to the entire crypto ecosystem.”
Institutions Shift To OTC Trading
As detailed in Circie’s blog, the fintech firm provides liquidity to digital asset exchanges, miners, and project developers. The next-generation blockchain technology focused company also offers liquidity to the “new cryptoasset investor base of venture capitalists, crypto funds, hedge funds, and family offices” throughout the world. Commenting on what the company is expecting from the crypto industry this year, Circle’s blog post noted:
This year, we anticipate further incremental growth in institutional adoption catalyzed by stablecoin usage, advancements in institutional custody solutions, increasing regulatory clarity particularly in the [United States], and improvements and innovation in core crypto infrastructure.
OTC trading allows users to settle trades directly with one another as no intermediary such as a (centralized) crypto exchange is required. Notably, institutional clients have been increasingly using OTC trading services offered by Circle and San Francisco-based exchange, Coinbase. Starting in December 2017, Diar Newsletter reported that institutional investors had started to shift to OTC bitcoin (BTC) markets as these offered more liquidity.
Circle's Bitcoin OTC Trading Services Outperform Grayscale's BTC Investment Trust
Moreover, a substantial amount of investments have been made in OTC funds including those provided by Coinbase, which introduced OTC trading for its institutional clients in November 2018. Notably, Coinbase’s OTC services managed to outperform Grayscale’s Bitcoin Investment Trust (GBTC) in terms of total bitcoin trading volume. Although OTC trade volumes represent only a fraction of the non-OTC crypto trading activity, they are growing steadily and are substantial considering that OTC desks only remain open for 31% of annual tradable hours.
MV Index Solutions, a VanEck subsidiary and developer of MVIS indices, launched (in November 2018) a bitcoin (BTC) index based on three large OTC desks. Referred to as the “MVIS Bitcoin US OTC Spot Index”, the market tracking index shows the “spot price of BTC” by “covering the performance of Bitcoin on major OTC platforms in the US and does not consider forks.”