Author: Tim Copeland, The Block; Compiler: Tao Zhu, Golden Finance

Top cryptocurrency trading firms stated that OTC trading volume has increased rapidly in the past few months, and the election results are the key driving factor.

Tim Ogilvie, institutional director at cryptocurrency exchange Kraken, said: “Long story short, OTC is going strong right now.” He added, “Prices are up, but volume is up. But it has risen sharply.”

Ogilvie pointed out that Kraken’s OTC trading volume increased by 220% year-on-year, and other cryptocurrency trading companies also experienced similar growth.

Jake Ostrovskis, an OTC trader at market-making firm Wintermute, said the market was quiet in the middle of the year until prices rose before the election, with market participants hoping to react to the outcome. Be prepared. He noted that Wintermute has been in communication with some clients for several years and that they see the election as a green light to finally begin trading.

Ebert Lin, a trader at market-making firm GSR, said the company has seen a significant increase in trading volume since the election.

“As BTC, ETH and altcoins have risen, projects and investors have become more active in managing their funds and risks.” “Institutions and others are also looking for new opportunities and ways to gain investment opportunities beyond BTC and ETH. ”

Traders at one OTC trading firm noted that recent trading volumes easily match the numbers seen at the peak of cryptocurrency interest in 2021.

BitGo's Go Network head Brett Reeves said the election has been a big driver of recent transaction volume, with two-thirds of transaction volume in the past three months due to the election results.

"The fact that the United States is the largest market in the world and they may be better positioned to do that is significant," Reeves said.

Customers are also starting to move further along the risk curve, dabbling in more cryptocurrencies - as long as they have sufficient liquidity.

"There's probably a general feeling that people are willing to take on more risk. You know, we look at this from two sides. One is just buying, but we're also seeing people move away from Risk curve. They start with Bitcoin, move to Ethereum, Solana, and maybe they start moving to some [altcoins]," Ogilvie said.

He added that Solana is a risk asset that has seen heavy trading volume in recent months.

Ogilvie listed a number of related assets in addition to the assets that Wintermute's clients typically focus on.assets, namely Bitcoin, Ethereum, TRON and AAVE. He said this is because they are the most liquid and customers will naturally gravitate there.

"I do think liquidity is the biggest driver for institutions. They're just looking for places where they can downsize. And retail investors obviously have the ability to be more selective and try different themes," he said.

Similarly, Lin said GSR’s clients are looking for new ways to gain investment opportunities beyond Bitcoin and Ethereum.

Looking ahead to the new year, BitGo’s Reeves expects the growth in demand to continue, especially for Bitcoin and Ethereum. He said OTC trading reduces some of the volatility in exchange markets, although it is still more volatile than traditional finance.

“It’s a lot calmer now than it was in previous years because people believe that this asset class is actually here to stay. These ETFs reinforce that. So I think we’re seeing this pair There are implications for the OTC trading market as well as broader cryptocurrency adoption,” he said.

Reeves added that another ETF could emerge in the crypto market — whether Solana, XRP or Ostrovskis — while saying that as options continue to become more widely used, one key he is watching Development is the increasing maturity of derivatives markets. He said large institutions with exposure to cryptocurrencies will need some form of hedging. Due to liquidity constraints, they may turn to OTC for quotes, and options are a key solution.

"Most of them will rely heavily on these products to hedge the underlying equity book or even bond or FX risk, and they will rely on volatility products to hedge that," he said. "So I think this is a huge area of ​​growth. I think we're already seeing that, and I think that may start to happen next year."

Ostrovskis added that Bitcoin ETF options The launch of ETFs has opened the door for prime brokers to create cross-collateralized products that would have been too costly to create with just the underlying ETFs due to fees.

"This again puts it very close to what the stock market will look like," he said. "It opens up a whole pool of capital there. I think it's going to be interesting where it flows."