Be it derivatives or cryptocurrencies, every trading operation needs a venue and the necessary instruments for carrying it out. The advent of the decentralized finance (DeFi) market has brought about a vast number of platforms with integrated services and instruments necessary for facilitating the operations of traders. However, the essence of decentralization lies in the absence of intermediaries, a factor that the DeFi market cannot boast much of.
For trades to be concluded in a truly decentralized fashion, they have to be on a peer-to-peer basis. This is where the traditional over-the-counter (OTC) approach comes in, perfectly replicated in decentralized space to streamline the trading process and reduce the number of intermediaries involved, as well as cut down on associated commissions.
OTC in DeFi — The ins and outs
Also known as off-exchange trading, OTC is an agreement concluded directly between two parties to a trade to conduct it without any external supervision on the part of an exchange or broker. Thus, by doing away with the need for traditional cryptocurrency exchanges, over-the-counter trading adds the true spirit of decentralization to any platform from DeFi offering such a function.
In DeFi, OTC trading is the prerogative of large-scale traders, such as funds or the so-called “whales.” The reason is that it is extremely useful in terms of savings on commissions for hedging on large orders. However, apart from specialized DeFi platforms, like decentralized exchanges (DEXs) and some crypto banking services that provide OTC amenities, other DeFi market participants engage in OTC as well.
Over-the-counter as a money-making instrument
Over-the-counter practices can be applied in a number of ways to generate income in DeFi, piggybacking on similar strategies from traditional markets.
One of the simplest ways of making money on over-the-counter trading is arbitrage, which involves buying or selling a certain asset across the market with a subsequent resale profit. The cryptocurrency space is known for arbitrage practices that revolve around myriad adjacent strategies, such as scalping, hedging, holding long and short positions or simple cross-exchange migration in search of better rates.
Arbitrage is common largely due to its low entry threshold and the conceptual accessibility of the underlying strategy to even newcomers to DeFi. To start arbitrage in over-the-counter trades, users merely need to buy or receive a large amount of a certain cryptocurrency at a low price from various exchanges or projects and then resell it at a higher price on another platform. The added value of the over-the-counter approach in arbitrage is that it seldom involves a high commission charged by the hosting platform.
CEX and DEX over-the-counter facilities
Some platforms in the DeFi space have taken their integration of over-the-counter practices a step further to enhance user experience and attract new traders. The recent partnership between the Kine platform and the Remitano bridge is an excellent example of the benefits of such diversity in platform product and service offerings. As a leading, decentralized derivative trading market, Kine makes over-the-counter trading more attractive thanks to its 100x leverage and flexible position management features.
Kine’s partnership with Remitano puts it into cooperation with one of the fastest and most secure exchange platforms for buying and selling cryptocurrencies across more than 50 countries all over the world. Remitano’s transaction volume of more than $9 billion is attributable to its fiat-to-crypto bridge and peer-to-peer trading service that leverages over-the-counter practices to further facilitate user accessibility to DeFi space.
The partnership between Kine and Remitano will allow the two platforms to combine the benefits of DEX and centralized exchange (CEX) instruments, and enhance the over-the-counter trading experience for users of both exchanges. The cooperation foresees faster and easier crypto purchase operations using credit and debit cards, instant deposits and a more straightforward Know Your Customer procedure flow for users.
To mark the partnership, Kine is launching three separate events for newcomers. You can participate here to know more about this strategic cooperation.
Market outlook
As the DeFi space reels from the economic turmoil gripping global markets, users of cryptocurrencies will be hard-pressed to resort to traditional centralized exchanges for making trades. The commissions involved in CEX trading make it less than attractive when every cent counts. As such, the ability to bypass oftentimes exuberant platform commissions by resorting to over-the-counter trading is a viable and attractive option, one that Kine and Remitano have started exploiting through their partnership.
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