Friday, February 3, 2023

OTC Volumes Dip as Chinese Exchanges Start Withdrawals, but Market Is Changing

OTC Volumes Dip as Chinese Exchanges Start Withdrawals, but Market Is Changing

As Chinese online exchanges start processing withdrawals once more, the over-the-counter (OTC) trading market has dipped slightly. But according to provider BitKan, large-volume traders are still looking for better alternatives.

Also read: Dogecoin Founder Jackson Palmer’s Re-Entry Into Crypto

The OTC market, in which users trade bitcoin and fiat directly with each other rather than via an exchange service, has been booming in China this year. It’s mostly due to increased regulation of online exchanges, which led them to suspend fiat and BTC withdrawals.

However large exchanges like BTCC and Huobi started to process withdrawals in June after three months of restrictions.

Smaller Traders Return to Online Exchanges as Withdrawals Restart

Users with existing accounts have probably returned to those platforms, said BitKan’s Sandy Liang. Interestingly though, they tend to be far smaller-volume traders. Those making trades of under 1 BTC probably find the online platforms more convenient.

BitKan operates a bitcoin data service and mobile OTC trading platform, which matches buyers and sellers directly and allows users to set their own prices and conditions.

Larger volume traders, many of which are miners, have stuck with the OTC platform — perhaps finding it more reliable.

“It doesn’t bother us. (Larger-scale trading volume) is very stable,” Liang said. “China is different to other countries; it has a huge number of retail investors.”

BitKan OTC Meetup
OTC Traders’ meetup in Chengdu

OTC and Online Exchanges Should Work Side-By-Side

BitKan held a meetup for large traders in Chengdu on Friday. That city was a hive of Bitcoin activity last week, with three other major events taking place. One of them was a miners’ conference hosted by market leader Bitmain.

For Liang and the BitKan team, it was a good opportunity to meet their users face to face. A lot of Bitcoin communication in China tends to happen online, especially on chat platforms like WeChat. About 130 attended the BitKan meetup, comprising about 30 management-level representatives from Bitcoin companies, and 100 regular traders.

Peter Wu, who spoke at the event, said we shouldn’t think of OTC and centralized exchanges as being in competition. In the traditional world, OTC markets and online brokerages work side-by-side. That should be the same for cryptocurrency exchanges.

About a 50/50 balance would be ideal, Wu added. With an interactive rather than competitive relationship, the two methods could grow together.

OTC Commentator Peter Wu
OTC Commentator Peter Wu

BitKan Focuses More on Overseas Traders

USA Flag New York CityIn any case, BitKan is trying to focus less on the Chinese OTC market and more on the growing international one. The company revealed recently that U.S. traders were only a small percentage of its users, but it wants to change that.

Part of the strategy is organizing and attenting meetups in other countries, as they did in Tokyo earlier this year.

“Meeting in person is essential to building trust,” Liang added.

BitKan is now actively looking for companies outside China to form partnerships. Specifically, they should be people or companies who can localize the product for their market.

Language is the main issue, as people feel more comfortable trading assets on a platform that speaks their language perfectly. Beyond that, there are differences in trading habits and laws that a local could use to tailor the product.

More Regulation in the US Could See Shift

There have been issues with heavily regulated online exchanges in the U.S. recently, especially with frozen or unilaterally shut-down accounts. It’s likely crypto traders there will look for alternatives as well.

Though also regulated, OTC decentralizes the buy/sell process. The OTC platform itself is just a matching app, and does not handle either fiat or BTC. This makes it far more like Uber than a bank — and therefore, also harder to control.

Are you looking for an alternative to centralized exchanges? Let’s hear your thoughts.

Images via BitKan

BitKan is a strategic partner of Bitsonline.

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