Why Crypto Whales Must Go Under The Radar

Cryptocurrency has well and truly hit the big time, attracting the attention of extremely wealthy individuals on the lookout for alternative asset classes and investments. 

But few realize that many of these people have a problem when it comes to trading crypto. For any investing activity to be worth their while, they need to deal in extremely large volumes, and that means trading millions of dollars’ worth of Bitcoin, Ethereum, Solana and other digital assets. The challenge is that the go-to trading platforms just aren’t cut out for such immense volumes. Executing large-volume transactions on public crypto exchanges is ill-advised due to the risk of high slippage and the inevitable price impact. 

So what’s a high-net-worth individual to do if they want to trade crypto? The answer is to take advantage of more discreet, over-the-counter trading services, which have emerged as the standard for big money trades. 

The Perils Of Public Execution

Modern cryptocurrency exchanges such as Binance and Uniswap simply aren’t designed for the elite. While they do handle millions of dollars in trading volumes, they do this carefully by maintaining a balanced orderbook, matching open orders with available liquidity. This works well when most traders are only buying and selling assets worth a few hundred or several thousand dollars, but the system quickly breaks down if someone tries to push through a multi-million dollar sell order. 

The problems with this are twofold – price slippage and market disruption. Slippage is what occurs when a trade is processed at an average price that’s lower than the current market price. It’s a common problem on decentralized exchange platforms that lack significant liquidity, but much rarer on centralized exchanges. However, when someone tries to buy or sell a massive amount of crypto, it causes problems for any public trading platform. 

Slippage happens because large-volume orders overwhelm the immediate supply or demand available for an asset. For instance, if an individual is trying to buy $10 million worth of BTC but the exchange only has $2 million worth of sell orders on its orderbook, it cannot facilitate the trade. To fulfill the order, the exchange will try to “walk down” by consuming increasingly lower-priced sell orders until it fulfills the entire volume.  

While most smaller traders won’t be too worried about slippage of, say, 0.5% on their trade, this translates to a loss of $50,000 on a $10 million trade. It’s an unacceptable operational expense for wealthier traders. 

As for the disruption, this is just as problematic. When someone places a large volume order on a public orderbook, it sends a clear message to the market and will likely trigger automated trading bots to immediately “bid-up” the price in anticipation of the buyer’s need. Alternatively, a similarly-sized sell order would trigger a cascade of panic selling, meaning that the trader is moving against the direction of the market. The result – yet more unacceptable losses. 

Trading Under The Radar

Public exchanges are simply not an option for high-net-worth crypto traders. Instead, most so-called “whales” gravitate to over-the-counter trading venues that allow them to buy and sell large amounts of tokens without raising any eyebrows. OTC platforms, as they’re called, will facilitate private deals between two parties outside of traditional exchanges, ensuring no one knows about their intentions. 

They can trade truly eye-watering amounts of crypto. One platform, called On-Demand Trading, takes pride in offering no trading limits, allowing to trade any amount of crypto 24 hours a day, seven days a week. It places the utmost priority on discretion, so traders can be sure their order will never appear in any public orderbook, eradicating the risk of market disruption that would inevitably result if they attempted to conduct their business on Binance or some other platform. 

Due to its focus on institutional clients and whales, On-Demand Trading can execute multimillion-dollar orders in a single purchase while ensuring complete anonymity for its clients and a guarantee that the trade will only be made public after the fact, when it appears on the public blockchain. On-Demand Trading acts as a kind of go-between, getting the buyer and the seller to agree on a price that’s benchmarked against major exchange platforms. In this way, there can be no slippage – the price quoted is the price the buyer and the seller gets, meaning clients can trade with extreme precision every single time.  

On-Demand Trading takes no chances, sourcing liquidity from a global network of institutions, cryptocurrency miners and other large asset holders, so it can offer rapid settlement in a highly-regulated security environment. 

Cryptocurrency exchanges are, and probably always will be, the lifeblood of the digital asset economy. They’re designed to handle retail and smaller scale trades seamlessly and they do this extremely well, but when it comes to whales and institutional capital, their usefulness becomes questionable. 

As digital assets become more mainstream, we can expect to hear a lot more about the role of OTC platforms and the essential role they play in high-volume trading.