During the last week, while crypto markets got hammered, digital currency-centric over-the-counter (OTC) trading desks were swamped with orders. The cryptocurrency OTC trading desk Cumberland, a subsidiary of DRW, explained that on June 13, the firm saw 30% more volume than the previous year-to-date high on May 13.
Over-the-counter (OTC) trading desks allow high net worth crypto traders to trade coins without affecting spot markets as much as they would on a traditional exchange. OTC trading desks also provide liquidity to large buyers that smaller exchanges cannot provide. A number of companies offer OTC services to crypto traders like Kraken OTC, Falconx, Cumberland, Athena Investment Services, Crypto Desk, B2C2, Bankhaus Scheich, Bitpanda Plus, and Coin Cola.
Amid the recent crypto market carnage, the DRW company Cumberland tweeted about the firm’s OTC flow during the past week and let people in on some of the moves that were made. “The most frequent question we’re asked on weeks like this is ‘what does the flow look like?’” Cumberland tweeted on June 14. “OTC flow gives some insights into how the market is handling these major moves,” the OTC trading desk added. Cumberland was founded in 2014, and over the last few years, it has become one of the top OTC desks worldwide.
When Cumberland started, news reports indicated that the company was able to acquire huge amounts of bitcoin (BTC) through a few auctions operated by the US Marshalls. Cumberland offers over 30 different digital assets against 500 pairs, and the company claims to be “one of the largest liquidity providers in the cryptocurrency space”. Speaking about the recent crypto market rout, Cumberland revealed that a lot of crypto volumes are coming directly to OTC desks.
Cumberland said:
On big swings, more volume tends to come to OTC desks, and yesterday was no exception; it was the most volume we’ve seen so far this year. In fact, it was 30% more volume than the previous YTD high, May 13th. Traders tend to use OTC during fast markets because it’s much easier to move size. Volumes were very BTC-centric, with about 75% of the total flow in bitcoin. ETH was the majority of the remainder. When looking to exit risk, traders tend to trade the most liquid products.
The crypto market bloodbath had shown that a significant amount of leverage had been wiped out over the past couple of weeks. Cumberland suggested that much of the June 13 flow was liquidations. A number of crypto credit companies have been accused of being liquidated on very large positions lately, such as Celsius. Major crypto hedge funds like Three Arrows Capital (3AC) are also accused of having financial difficulties and facing liquidations of over-leveraged positions.
“The flow ratio suggests a lot of the flow was liquidations, with a 2:1 ratio of sellers to buyers,” Cumberland’s Twitter thread concluded. “As always, Cumberland is proud to act as the backstop of liquidity during the most severe market moves.”
