In the cryptocurrency world, a select group of top players has built a private over-the-counter (OTC) trading network that handles billions of dollars in monthly volume—using Skype. Instead of relying on Bloomberg terminals or Symphony, which are standard on Wall Street, these traders chat on Microsoft's Skype to negotiate large block trades and settle them via bank wires and direct cryptocurrency transfers. According to a Reuters report, OTC desk volumes have increased tenfold year-over-year, with some platforms now routinely processing over $100 million per day.
The Billion-Dollar Skype Club
This tight-knit group of about 20 participants includes large investors, miners, payment processors, and hedge funds. They bypass public exchanges like Coinbase or Kraken to avoid the risks of hacks, downtime, and market slippage. Instead, they use Skype—a free, globally accessible tool—to negotiate prices and execute trades. “We needed a tool that was global and more or less free and Skype provided that,” said Bobby Cho, global head of trading at Cumberland Mining. Michael Moro, CEO of DCG’s Genesis Global Trading, revealed that his desk trades an average of $75 million to $80 million daily, and hit a monthly record of $1.5 billion to $2 billion in December 2017. Circle, another major player, processed up to $4 billion per month over the past year, according to spokeswoman Jennifer Hanley.
Why OTC Trading Matters
OTC trading serves as a risk management strategy. “When the big hacks happen we tend to see business go up,” explained one OTC trader. By trading off-exchange, participants avoid the risk of losing funds if an exchange is compromised. Moreover, OTC desks provide privacy for “whales” who want to execute large orders without moving the market. “Generally, you would go trade through an OTC desk when you have a large block trade you want to do without moving the market too much or incurring too much slippage,” said Kevin Zhou, founder of crypto-focused hedge fund Galois Capital. To mitigate risks, some firms record calls, register with U.S. regulators, follow KYC and compliance standards, and trade only bitcoin and a handful of altcoins. This secretive yet efficient ecosystem has become a vital pillar of crypto liquidity.
(Note: This article is based on a 2018 report and reflects market conditions at that time.)