Venture funds and market makers greatly benefit from OTC token deals, which creates an uneven playing field for retail traders. This article explores the mechanics of such deals and their market impact.
How OTC Token Deals Work
OTC deals allow institutional investors to buy tokens at a 30% discount and hedge through short positions in futures markets. This creates an opportunity for annualized returns of up to 90%.
Advantages for Funds and Projects
OTC sales enable projects to quickly raise capital without the volatility of public token sales. Meanwhile, venture funds can secure predictable profits without investing in riskier ventures.
Market Asymmetry and Its Impact on Retail Traders
Retail traders find themselves at a disadvantage due to the lack of transparency in these deals. They suffer from selling pressure when institutions execute their hedging strategies, creating a misleading picture of demand and a project’s health in the market.
Despite the risks and drawbacks, OTC token deals continue to play a critical role in the crypto market. Retail traders need to understand the mechanics of these deals and adapt their trading strategies accordingly.
