Arsen on Warpcast

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This week, we continue building the /bakstag omnichain over-the-counter protocol. We've wrapped up our market research and here's what we found out 🧵 :

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1) Today, OTC holds great importance in the cryptocurrency market. It is mainly attended and traded by big market players to handle large investment capital. Over time, this market segment has continued its development and started to attract a large number of people from the retail market, generating new trends and products.

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2) The main general trends in the OTC market today are: - Expansion of the range of assets due to the needs of the community. - OTC platforms were forced to widen their settlement toolkit to defend themselves from client leaks. - The battle for clients forces them to reduce the commission for transactions, in some cases to zero, which has a positive impact on the client and his attraction to the platform, but reduces the possibilities of technological development of the platforms themselves due to reduced profit generation.

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3) The overall competition in the market is increasing, but it is not as overheated as other cryptocurrency industries, especially in the area of decentralization and B2C market, which gives the opportunity to work and develop new OTC platforms.

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4) The spot OTC market size during the first three quarters of 2023, had an average daily trading volume of $1.44 billion, based on responses from market participants who were willing to disclose their trading volumes.

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5) Generally, people prefer OTC trading over traditional platforms like CEX’s because of its unique features such as specific transaction parameters including timing and even asset exchange rates.

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6) From an institutional investor's perspective, a significant proportion of all trades are conducted through the OTC market, while 1800% less than the average daily volume passes through the spot centralized exchanges (LMAX and ErisX) that specialize in working with institutional investors. This indicates a strong interest by institutional investors in the OTC market rather than trading on the exchange. However, this trend will continue until 2023, as the ETH and BTC ETFs being adopted now may reverse the trend and pull a large portion of institutional investors to themselves.

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7) On the other hand, the total average daily volumes on the CEX significantly exceed the OTC market, amounting to $23.4 billion. From a retail user's point of view, the OTC market is not so attractive, as it provides a complex interface for the average user, thus it is more attractive for the average user to make a transaction using the spot exchange in a simplified format. However, with the improvement of platforms, this sector of the market will be able to attract its retail user, as the market is not yet fully formed and is more in the "Blue Ocean" stage.

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8) According to CCdata, the customer base in the OTC cryptocurrency markets appears to be expanding significantly: 80% of respondents reported an increase in their customer base in 2023 compared to 2022. Conversely, 13.33% of organizations reported the number of customers remaining the same, indicating the stability of the market segment, while a small portion of organizations 6.67% reported a decrease in the number of customers.

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9) Also, one should not forget about the risks associated with the regulatory component of the cryptocurrency market, including OTC transactions. Despite the fact that “Bakstag” is a decentralized platform for P2P OTC transactions, changes in the regulatory system can have both positive and negative impact on the project. On the one hand, the platform can provide new opportunities for convenient decentralized sale and purchase of assets, attracting new customers. On the other hand, it may lead to an exodus of clients from the crypto space, and a shift to work with more centralized platforms.

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10) According to CCdata, 40% of respondents did not notice significant changes compared to the previous year, 33.33% noted the positive impact of the normative acts on their activities. However, 26.67% of respondents felt a negative impact, which indicates the different effects of changes in the regulation of the OTC cryptocurвrency market.

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11) In addition, in terms of the possible rapid development of the crypto OTC market and its rapid development can speak the statistics of standard deviation, which is present on CEX platforms and also has an impact on the retail investor and trader. For example, Execution of 1BTC and 10BTC. For comparison, the standard deviation on Binance is 10% on Poloniex it is 78% and on Binance US it is 130%.

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12) These differences emphasize the consistency of execution in the OTC market regardless of size and volatility. Therefore, if OTC crypto venues can simplify the interface enough for the average user with the ability to reduce the deviation per trade with a low entry threshold (in the case of Bakstag - P2P), user interest could increase significantly.

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13) On the basis of market analysis, we can conclude that the overall market of OTC P2P DEX platforms is only at the initial stage of development as the competitive environment in this niche is quite small.

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