Over the past week, while crypto markets were in a tizzy, digital currency-focused over-the-counter (OTC) trading desks were inundated with orders. DRW subsidiary cryptocurrency OTC trading desk Cumberland reported that on June 13, the firm saw 30% more volume on May 13 than the previous year.
‘On big swings, more volume hits OTC desks’, says Cumberland
Over-the-counter (OTC) trading desks allow high-net-worth crypto traders to trade coins without affecting the spot market much as they would trade on a traditional exchange. OTC trading desks also provide liquidity for large buyers that smaller exchanges cannot provide. Several companies provide OTC services to crypto traders such as Kraken OTC, Falconx, Cumberland, Athena Investment Services, Crypto Desk, B2C2, Bankhaus Skitch, Bitpanda Plus and Coin Cola.
Amidst the recent crypto market carnage, DRW company Cumberland tweeted about the firm’s OTC flows over the past week and let people in on some moves. “The question we get asked most often in weeks like this is ‘what does the flow look like?'” Cumberland tweeted “OTC flows give some insight into how the market is handling these major moves,” the OTC Trading Desk said. Cumberland was founded in 2014, and over the years, it has become one of the top OTC desks worldwide.
When Cumberland first debuted, news reports noted that the company was able to acquire massive amounts of bitcoin (BTC) through auctions conducted by some US Marshalls. Cumberland offers over 30 different digital assets as against 500 pairs, and the company claims to be “one of the largest liquidity providers in the cryptocurrency space”. Speaking recently about the path of the crypto market, Cumberland revealed that a lot of crypto volume comes directly to the OTC desk.
Cumberland said:
On large volatility, more volume tends to hit the OTC desk, and yesterday was no exception; This was the highest volume so far this year. In fact, it was 30% higher in volume than the previous YTD high, May 13. Traders use OTC during fast markets because the size is very easy to move. Volumes were very BTC-focused, with about 75% of the total inflows into bitcoin. ETH was the majority of the remainder. In a quest to exit risk, traders trade the most liquid products.
The bloodbath in the cryptocurrency market has shown that the huge amount of leverage has been wiped out over the past two weeks. Cumberland suggested that there was quite a bit of flow liquidation on June 13. Several crypto lending firms have been accused of liquidating very large positions such as Celsius in recent days. Large crypto hedge funds such as Three Arrows Capital (3AC) are also being accused of having financial difficulty and dealing with liquidations from over-leveraged positions.
Cumberland’s Twitter thread concluded, “The flow ratio suggests that there were a lot of inflow liquidations, with a 2:1 ratio of sellers to buyers.” “As always, Cumberland is proud to act as a liquidity backstop during the most severe market moves.”
What do you think of Cumberland’s summary of OTC flows from the recent crypto market bloodbath? Let us know what you think about this topic in the comment section below.
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