Circle's OTC Desk Handled $24 Billion in Crypto Trades During 2018

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.”

Sub-accounts in Crypto: What They Are and How They Work

 

Julia Gerstein, a crypto trading bots enthusiast and a content writer at TradeSanta. My final goal is to help readers find what they need, understand what they find, and use what they understand appropriately.


Speaking generally, a sub-account is a segregated smaller account that is tied to a larger primary account. Sub-accounts may serve different functions depending on the objectives of their owners. The term can refer to multiple email addresses linked to one user or secondary accounts tied to a primary account with a financial institution or a bank.

For this article, we will be looking at sub-accounts as they exist in the crypto industry, and specifically on trading platforms.

Built-in Sub-Accounts

On trading platforms, the sub-accounts feature allows users to create a set of subsidiary accounts with different trading strategies, funds and end customers. On some platforms, general accounts already come with built-in sub-accounts.

For example, exchange platform Crypto Facilities provides each user with cash and margin accounts when they sign up. While deposits and withdrawals are completed with the cash account, trading an instrument requires users to make an internal transfer from a cash account to their margin account that corresponds to the instrument in question.

Each instrument has its own margin account. This grants users more control over their funds and allows them to manage risks for each instrument separately from their main balance.

Optional Sub-Accounts

Other cryptocurrency exchanges, such as Gemini and Binance, have launched sub-accounts as an optional feature for institutional investors.

As an optional feature, sub-accounts can serve to introduce additional security measures and different access levels between the main account and its subsidiaries. Binance has underlined the differences between a master account and its subsidiaries, providing the former with the exclusive ability to view all data and balances, transfer funds between accounts, and have full managerial control and access to a range of asset audit tools.

Here master accounts have sole control over the movement of assets between sub-accounts, and can grant each of them different access levels and permissions. This ensures that the main account has the power to direct and monitor the actions of all its associated accounts, while each sub-account can perform its function independently from other sub-accounts.

Not Only for Institutional Investors

While institutional investors have been able to create sub-accounts for a while, this feature is still being introduced by more and more major exchanges.

Now even individual investors can create subsidiary accounts to try and assess the performance of distinct trading strategies. For example, HitBTC recently introduced its own sub-accounts feature that is now available per user’s request.

At HitBTC, sub-accounts enable users to create separate subsidiary accounts with which they can utilize various trading styles and strategies with operational autonomy. While each sub-account is separate, all of them are still tied to a master account and contribute to the cumulative volume of all accounts connected to the master.

Because trading volume is measured cumulatively, the use of the subaccounts feature can open up additional benefits for traders such as lower commissions due to progressive fee tiers that reward users for contributing to the liquidity on the trading platform.

Therefore, users can perform a variety of different trading activities unconnected to each other, and all the activities will still weigh in the financial favor of the parties involved. Master accounts also have access to important data such as the performance of each sub-account and total trading fees of all linked accounts combined. While the feature is designed with institutional and corporate clients in mind, on HitBTC any user can create sub-accounts upon request.

The adoption of this feature by more and more trading platforms will be beneficial for both institutional and individual traders. Some users can utilize it to execute different trading strategies or try various algorithms with a clear picture of their effectiveness, others to manage their team and analyze the performance of each account securely and conveniently.

Featured image by Tyler Franta on Unsplash