In-depth analysis of on-exchange and off-exchange Bitcoin transactions

In the world of digital currencies, Bitcoin is undoubtedly one of the most influential and representative assets. As more and more people invest in cryptocurrencies, it is particularly important to understand how Bitcoin is traded. On-exchange trading and over-the-counter trading are the two main trading methods in the Bitcoin market, each with its own unique advantages and disadvantages. This article will explore the differences between the two in depth to help readers fully understand the complexity and diversity of Bitcoin trading.

First, we need to clarify the basic concepts of on-exchange and over-the-counter trading. On-exchange trading usually refers to Bitcoin transactions conducted on exchange platforms. Investors register accounts and use legal currency or other cryptocurrencies to buy or sell Bitcoin directly on exchanges. Typical representatives of this trading method include well-known trading platforms such as Binance, Huobi, and Coinbase. In contrast, over-the-counter (OTC) trading refers to transactions conducted by investors through private agreements or dedicated over-the-counter trading platforms. This method usually involves large trading volumes, and communication and negotiation between traders are its main characteristics.

Next, we can analyze the differences between these two trading methods from multiple perspectives.

From the perspective of transaction transparency, since on-exchange transactions are conducted on public exchanges, all transaction records will be recorded on the blockchain, and investors can view transaction history and market conditions at any time. This transparency not only enhances investors' trust, but also makes market prices more reasonable. On the contrary, since over-the-counter transactions are private transactions, the prices and terms of both parties are often not disclosed, which may lead to price opacity. In some cases, over-the-counter transactions may even pose the risk of price manipulation, which may be a hidden danger for ordinary investors.

From the perspective of liquidity, on-exchange transactions usually have higher liquidity. Due to the large number of buy and sell orders, investors can quickly find counterparties and complete transactions. However, in over-the-counter transactions, due to the relatively small number of participants, especially when the market is volatile, there may be a lack of liquidity. This means that when investors want to sell a large amount of Bitcoin, they may need to spend more time looking for suitable buyers.

Of course, security is also an aspect that cannot be ignored. In on-exchange transactions, although exchanges will take a variety of security measures to protect the safety of users' funds, there is still a risk of being hacked. In recent years, several large exchanges have been hit hard by security vulnerabilities, resulting in heavy losses of user funds. In over-the-counter transactions, although some risks can be reduced because the two parties to the transaction can communicate directly, in the absence of third-party guarantees, the security of the transaction depends entirely on the trust of both parties. Once a dispute occurs, investors may face large losses.

From the perspective of technological development, the continuous evolution of blockchain technology is also affecting the way Bitcoin is traded. Emerging decentralized exchanges (DEX) are gradually emerging, providing trading solutions without intermediaries, which has changed the mode of on-site trading. At the same time, over-the-counter trading is also gradually moving towards compliance and standardization with the help of the transparency and security of blockchain technology.

When summarizing the differences between on-exchange and off-exchange Bitcoin trading, we can see that each trading method has its own unique advantages and disadvantages. Choosing the right trading method depends not only on one’s investment goals and risk tolerance, but also on changes in the market environment and trends in technological development.

Finally, as the Bitcoin market continues to develop, investors should remain sensitive to the market and pay attention to emerging technologies. When choosing a trading method, in addition to considering their own needs, they also need to have a clear understanding of the overall market situation. In the future, with the emergence of more innovative technologies, new trading methods may emerge, further enriching the Bitcoin trading ecosystem.

In this era of change, understanding the difference between on-exchange and over-the-counter trading can not only help investors make more informed decisions, but also allow them to find their place in the complex market. Whether you are a novice or an old hand, mastering this knowledge is a big step on the road to cryptocurrency investment.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

As we all know, if you want to invest in digital currency, there are only two ways: buying coins and mining. Generally speaking, when investors buy coins, they will do it through trading, which is the most common way to participate in digital currency investment. In fact, the exchange has another nickname, that is, the on-site trading platform, because the acute trading method through the exchange is generally on-site trading. In addition to on-site trading, there is actually another method that we don’t usually come into contact with, that is, over-the-counter trading. So what are Bitcoin over-the-counter and on-site trading? What is the difference between the two? Let the editor of the currency circle talk about it below.
 What are over-the-counter and on-site Bitcoin transactions?
On-exchange trading, also known as exchange trading, refers to a trading method in which all supply and demand parties gather at the exchange to bid and sell. OTC trading, also known as peer-to-peer (offline) trading, refers to a trading method in which both parties become direct counterparties. On-exchange trading can be likened to buying tickets on a large ticket purchasing platform or ticket purchasing station, while OTC trading is scalping tickets.
As major exchanges in my country have stopped trading services, many currency holders choose to trade in overseas markets or find trading counterparties through online instant messaging software. The latter is called over-the-counter trading, that is, not trading through a trading platform, but an over-the-counter point-to-point transaction of "one hand over money, the other hand over currency". Currency holders mostly find trading parties through WeChat groups and QQ groups. In addition to bearing their own risks, some use group owners as third-party guarantees for both buyers and sellers. After both parties transfer the bitcoins and money to the group owner, the group owner confirms the transaction and charges a certain guarantee fee.
In the world of Bitcoin, everyone has a wallet, and each wallet has a corresponding address. Bitcoin can be withdrawn from one address and transferred to another address, and the withdrawal operation is completed without the need to convert it into RMB or other currencies. In over-the-counter transactions, one party transfers funds to the other party through Alipay, WeChat or bank transfer, and the other party transfers the Bitcoin to the payer's wallet.
 What is the difference between over-the-counter and on-site Bitcoin transactions?
OTC transactions are mostly generated when the supply of goods is insufficient to meet the demand or when certain regulations at the supply and marketing fair are unreasonable. It is easy to generate unhealthy practices and even provide opportunities for speculators. To eliminate OTC transactions, fundamentally speaking, it is necessary to establish and maintain the coordination of the supply and demand ratio of goods.
On-site trading, also known as exchange trading, refers to a trading method in which all supply and demand parties gather in an exchange for bidding. This trading method has the characteristics of the exchange collecting margin from trading participants, and at the same time being responsible for clearing and assuming performance guarantee responsibilities.
In comparison, OTC trading: 1. It is more flexible. You can buy coins without real-name authentication. You only need to register a platform account. For buyers, the process is simple and convenient; 2. It has strong privacy protection. No transaction funds information will be retained on the platform because it is a one-to-one transaction between online and offline; 3. The transaction volume can be very large. For example, if you want to buy a thousand coins, you will not be able to receive them in the short term, and the price of the platform coin will be pulled very high. However, peer-to-peer transactions can lock in prices and complete transactions in one go.
The above content is the analysis of the editor of the currency circle on the two questions of what are the over-the-counter and on-the-counter transactions of Bitcoin and what is the difference between the over-the-counter and on-the-counter transactions of Bitcoin. In fact, there are three business forms of over-the-counter transactions. The first is the C2C over-the-counter transaction franchise model. This type of platform only operates C2C over-the-counter trading business; the second is the wallet APP + over-the-counter trading model. This type of platform integrates the over-the-counter trading function into the Bitcoin wallet APP; the last is the on-the-counter + over-the-counter trading business model, which operates both currency-to-currency on-the-counter transactions and digital currency-to-RMB over-the-counter transactions. Everyone should note that the prices of over-the-counter trading platforms are generally higher than those of trading platforms.

In addition, transaction fees are also an important consideration. In on-exchange transactions, exchanges usually charge a certain percentage of transaction fees, which vary from platform to platform, and some even rise sharply during peak periods. In contrast, the fees for over-the-counter transactions are often more flexible, and the two parties can reach a consensus through negotiation. In some cases, the fees for over-the-counter transactions may be lower than those for on-exchange transactions, especially for large transactions. OTC transactions can attract more investors by reducing transaction costs.

In addition, for different types of investors, choosing on-exchange or over-the-counter trading also reflects their risk preferences and investment strategies. For novice investors, on-exchange trading provides a more intuitive and convenient trading experience, especially through chart analysis and market data, which can help them make decisions quickly. For experienced investors or institutional investors, over-the-counter trading provides higher flexibility and privacy, which can meet their needs for large transactions.

Under the influence of market trends, the choice of on-exchange and over-the-counter transactions is also constantly changing. As the Bitcoin market matures, more and more investors are beginning to pay attention to how to reduce transaction costs and improve transaction efficiency. In this context, the demand for over-the-counter transactions is gradually increasing. Especially when the market is unstable, many investors tend to use over-the-counter transactions to avoid the risks brought by price fluctuations.