Hi guys, I'm Fernando Martinez I'm a trader here at Octagon Strategy, and I'm here to talk to you about over-the-counter trading versus exchange trading

There's a lot of the guys out there, especially new people that want to purchase bitcoin, but they don't know their options Both of them are really good, however, both of them are targeted or can be beneficial for different types of traders or purchasers or persons that want to be involved in this cryptocurrency industry So, right now you can see here in my screen, we have an amazing app called tradeblockcom The only reason that I'm using this is because you can see several exchanges, and what I want to show you is how a ticker works, and what is the order book depth on the exchanges

So, let's start Let's say that you guys want to buy 10 bitcoin What price do you think that you would get under that for those 10 bitcoin? If you see here where my mouse is, you're gonna gonna see $2,585 USD per bitcoin That is the price in Bitstamp Bitstamp is one of the very good exchanges

So, what does that mean? Does that mean that you can purchase 10 bitcoin there? No That means that is the last executed price at that exchange That is the ticker price So, you have to go to the order book, where it goes the bids and the asks, to see the depth So if you wanna purchase 10 bitcoin, you have to go here, follow my mouse please, you're going to see the ask price

This is people selling to you And as you can see here, you can see 06 So you can buy 06 bitcoin at $2,587

Do you see the difference there? $2,585 is the last executed price, and the first sell order is at $2,587 So, as you can see right now, I can buy 10 bitcoins at $2,587 So I'm not gonna get the $2,585 that I was seeing before Now if you see, it's very interesting now The price changed to $2,587, because that means that there was an order that got executed, a sell order that got executed

If you follow my mouse again, it's gonna show you $2,582, that's the bid price So, the last executed price and the ticker price are at par Now, if you want to purchase 10 bitcoin, that's great An exchange is the way to go, because the depth is good for you Let's say if you want to purchase 100 bitcoin, what is the price that you're gonna get? We're gonna do the same exercise, and then just for matters of being a little bit more dynamic, I'm going to use another exchange, let's use GDAX, which is another great exchange

Now remember, this tradeblock app that I'm using, is only for price references You cannot execute things through here You actually have to go through the exchanges Now let's say that I'm a wealthy individual, or I'm an institution, or I'm just a huge crypto fanatic person that wants to purchase 500 bitcoin or 100 bitcoin, what is the price that I would get on an exchange? Again, follow my mouse, you're not going to get $2,583 as the ticker expresses So there's a lot of people that get a little bit anxious, whenever they're seeing the pricing, and they want to buy 100 bitcoin or 200 bitcoin, but it's not going to match

So let's go here to the orders, this is the order book depth Let's go to the ask, which are the sellers And here, as you can see, my mouse please, let's see the total quantities This is each quantity that are in those orders There's a guy there selling at $2,583 – 9 bitcoin

There's a person selling at $2,5834 – 3 bitcoin, etc You get the logic And then here on the right hand side, you're going to see the aggregated total, so there's a sum total So this means that if I want to purchase 100 bitcoin, I'm going to have to go all the way here where my mouse is, and you're going to see there's 108 bitcoin available at $2,593

What does that mean? That means that it's $10 USD above spot $10 USD above the ticker price So, if you want to purchase 100 bitcoin, and you want to buy at ticker / spot pricing, you're not on the same expectation You have to consider the order book depth, how deep is the order book, and who has enough liquidity for you, how down you have to go in order to fulfill your size And it's going to work the same way on the sell side

Let's say that I have 100 bitcoin, and I want to sell 100 bitcoin Again, I'm not gonna do it at the ticker price, I'm gonna have to watch the order book depth Now, these I'm talking about are only limit orders – taking in the market If you want to go into maker/taker, that's another thing Because you can place an order, you can leave it open, and maybe it'll get executed at that price, but we can see that in the next video

Right now, I'm just talking about instantly executing a trade So if I want to sell 100 bitcoin, I'm going to go here to the bids, to the buyers Again, follow my mouse please, I'm going to go all the way at the end, and if you can see here, for the first 50 orders, the depth is only 50 bitcoin So, what am I gonna do – I'm just gonna group here, and I wanna see bigger guys I want to see more depth

Here, if I wanna sell 100 bitcoin, the sell price, or that price that I would get paid on, if I want to execute immediately, is $2,556! So guys, that's $30 USD below spot It's not a bad price, it just means that the depth of an order book in an exchange is not very liquid, it's very scarce How does over-the-counter work? How it usually works is you have to go to an institution, at that institution or that trading desk, you're going to create an account, you're going to KYC, they're going to get to know you a little bit, you're going to get to know them And then, usually you're going to have a dedicated trading chat, where you're gonna be able to request for quotes You're gonna show your size

You're gonna say: hey guys, I wanna buy 100 bitcoin, That's $250,000 USD right now What is the price that you, as an over-the-counter desk, can give me? And the over-the-counter desk will say: you know what, I'm going to look at my orders that I have at this moment I'm going to look at my liquidity which is greater than an exchange, and I'm going to provide you the quote for 100 bitcoin or 500 bitcoin; and those quotes are going to be closer to the market, and the benefit of the over-the-counter trading is that, it aims to beat the order book depth So, what are your options? If you want to start placing orders, that's good If you have a small amount of money that you just want to play around, and you want to get involved in the crypto space, the exchange is the place to go, because you can go, you can purchase 1 bitcoin / 2 bitcoin / 0

5 bitcoin, doesn't matter You can go there and you're going to get prices around the ticker price But if you want to take a higher position, the majority of the activity happens over the counter So us, over-the-counter traders, what we do is we take the pricing of the exchange, just as a benchmark 80% or 90% of the whole volume of bitcoin happens off exchange

Me, as an over-the-counter trader, I can tell you that, you can start seeing how the pricing moves, but that's always driven by the exchanges That serves as a benchmark, because that tells us the sentiment of the market, if it's a bull market or if it's a bear market, which is great, we need that But if you want to buy 100 bitcoin or you want to buy 200 bitcoin, or even greater amount, 1,000 / 2,000 / 3,000, then you have to do it over the counter So, for example, in an over-the-counter trading desk, you can get $2,592, maybe $4 above spot, but for the depth of 100 bitcoin So, as you can see, it's great for large amounts

But, if you want to purchase 1 bitcoin, and you want to do it over-the-counter, then there's no benefits for either the over-the-counter desk, or you because you basically have to interact with a trader, and you're gonna have to accept the price, but that price you can also get it on the exchange So, you only have to use over-the-counter desk when you don't want to impact the market because your position is large enough Here in the crypto world, a large position, or there's people with millions of dollars and institutions with millions of dollars, but what we usually suggest is anybody who wants to purchase an instant order or wants to sell an instant order of $50,000 USD, $100,000 USD or greater, go to an over-the-counter desk If you want to place orders below $50,000 USD, go to an exchange

That's it for now guys I'm looking forward to doing a little bit more videos with you Again, Fernando Martinez, Trader at Octagon Strategy Nice talking to you