Interesting Analysis of Bitcoin OTC Trading

To put it more simply, over-the-counter trading of Bitcoin means that someone has coins that they want to sell, and someone has money that they want to buy coins. The middleman matches the two and makes some money or coins by buying high and selling low.

As thunderbolts came from nowhere, several major Bitcoin exchanges in China banned withdrawals due to policy reasons. The market shifted instantly. It is said that OTC trading has been extremely popular recently.

Several big guys are shouting about buying and selling coins every day. OTC is fair and affordable!

Many people were confused by this explanation. What a mess, what a confusing thing, OTC, how can it be the same as the automatic toll collection on highways? Oh, no, that's ETC...

But what exactly is OTC trading?

Baidu has a clear explanation for over-the-counter trading: Over-the-counter trading (OTC) refers to the activity of trading unlisted or listed securities in the over-the-counter market instead of trading them in the exchange. Instead, it is a transaction reached privately at a price higher or lower than the price stipulated in the supply and marketing meeting or with other conditions (such as matching inferior goods, barter, etc.). It is also called "over-the-counter trading" or "counter trading".

But despite this, the above explanation still seems too literary and pedantic.

I might as well write a few words here to talk about what over-the-counter transactions are in the Bitcoin circle to set the record straight.

Of course, to make it easier to understand, let’s first describe a scene that everyone can understand.

It was the winter of 1944, in the North China Plain.

It was a pitch-black night. The snow that had fallen a few days ago had not melted yet, and the wind was freezing outside. Old man Zhang and his family of five huddled at home, keeping the kang hot and enjoying the rare comfortable time in winter.

This year, the weather was good and the harvest was good. Zhang Lao's family had a bumper wheat harvest. Even after paying the tax to the Imperial Army, they still had a lot of wheat left. In order to hide the wheat, the family dug a cellar more than one meter high in the side room and stuffed more than a dozen bags of wheat into it without anyone noticing.

"There's plenty of white flour this year! If you two want to eat pancakes, just tell mom, but don't tell anyone else! If you do, you won't get anything!"

On the day of hiding the wheat, Old Man Zhang's wife narrowed her eyes and whispered to the ten-year-old girl and the seven-year-old boy, while the boy's grandmother, on the other hand, grinned foolishly with her toothless mouth.

It seems that the Japanese are like a rabbit with a long tail that cannot grow long. A few days ago, Wang Erlaizi, the village head, squatted at the wall and complained to Old Man Zhang that once the Japanese are finished, the yellow notes given by the Imperial Army will be like waste paper, and no one will want them even to wipe their butts. So Old Man Zhang was determined not to sell the grain to the "grain collection team" who walked the streets shouting every day.

In the past, we had enough food and drink, but hiding the food underground all the time is a worry. It would be a crime if it was discovered that we were hoarding food secretly, and we had to keep our tail between our legs and live in fear. It was really a miserable life!

Old man Zhang was thinking about it when suddenly there came a sound of small stones knocking on the door.

"Did you hear that?" Old Man Zhang's wife kicked him.

"I heard it!" Old man Zhang looked around. The children had turned over and were sleeping soundly, and his mother-in-law was also sleeping with no movement.

There were two more "dong" and "dong" noises. Old man Zhang jumped up from the bed, put on his cotton jacket and trousers, lit a candle, tiptoed to the door, removed the bolt from the top of the door, opened the wooden door a crack, and shouted into the crack: "Who is it?"

"Countryman, it's me!" A dark figure was getting closer and closer.

Old man Zhang couldn't help feeling excited. He looked around alertly, pushed the door open completely, and welcomed the visitor in.

"Oh, Instructor Zhao! I've been looking forward to seeing you here for a long time!" Old man Zhang held the other's hand and said excitedly.

The two people squatted beside the stove in the dark.

"Fellow villager, I heard that your family has extra food?" Instructor Zhao asked.

"Yes, yes! Five or six bags left." Old man Zhang responded hurriedly.

"We want to buy the grain at a high price! The troops need food!" Instructor Zhao said to Old Man Zhang earnestly, "Look, I brought the money!"

After saying this, Instructor Zhao took out a stack of yellow Japanese banknotes from his pocket and handed it to Old Man Zhang, but Old Man Zhang pulled his hand back and stuffed a bowl of tobacco foam into his pipe.

Instructor Zhao noticed that Mr. Zhang was unwilling to accept the counterfeit money, and his face was embarrassed for a moment, but then he took out a white bill from his pocket and explained to Mr. Zhang:

"We don't want the paper money from the Imperial Army. How about our Border Region money?"

Old man Zhang still didn't stretch out his hand, mumbling: "Why do I need a border ticket? I'm not going to the border area, so what's the use of it?"

Instructor Zhao gritted his teeth and took out a Yuan Datou from his pocket. "My fellow villager, the army is not short of silver dollars... One Yuan Datou can buy five bags of grain. Is that right?"

Old man Zhang rolled his eyes, took a long puff of his cigarette, tapped the pipe against the sole of his shoe, and slapped his thigh, "Hit!"

"If anyone in the village is short of food and has silver dollars or small yellow croakers (gold bars), they can buy them from our army. You can go back and ask! We will mobilize them. We are the people's team, dedicated to solving their problems!" Instructor Zhao added.

"Leave it to me." Old man Zhang patted his chest and promised.

Under the cover of night, three more people came into the house, and Old Man Zhang went into the cellar of the side room and carried out grain to pass out. After a while, the three people carrying five bags of wheat quickly disappeared into the darkness, as if they had never been there.

Old man Zhang excitedly stroked the silver dollar in his hand, and from time to time he blew it and put it to his ear to listen to the sound.

I thought to myself, with it, I can buy a few more pounds of meat for my family when I go to the market, and I can also buy two pieces of cloth. This year I can have a good year...

The scene description ends. This scene is purely fictional and any similarity is purely coincidental.

In fact, the above description is the simplest and most typical over-the-counter trading scenario.

In this scenario, wheat during the war is hard currency, equivalent to Bitcoin in the current market.

Old Man Zhang is the holder of wheat, that is, the holder of hard currency, which is equivalent to the private holder of Bitcoin in the real market.

Because it was in the enemy-occupied area, although wheat was a hard currency, it could not be circulated. It was not allowed to be sold directly and blatantly, and naturally large institutions were not allowed to sell wheat in an organized manner, which was equivalent to the current policy prohibiting the withdrawal of coins.

Yellow bills and white bills are equivalent to various currencies with low credit, similar to the unreliable currencies such as the Zimbabwean dollar and Venezuelan dollar that have super rapid inflation in the real world. Naturally, Old Man Zhang is unwilling to accept them.

Silver dollars or small yellow croakers (gold bars) are equivalent to currencies with decent credit in the real world and can be exchanged and circulated with hard currencies such as wheat. After considering the price, Old Man Zhang chose to sell wheat in exchange for silver dollars.

Instructor Zhao of the Eighth Route Army is equivalent to an over-the-counter trader who is responsible for coordinating the circulation of hard currencies such as wheat in the real world. He not only buys wheat with silver dollars, but is also willing to sell wheat in exchange for silver dollars.

OTC transactions are mostly generated when the supply of goods is insufficient or when certain regulations at the supply and marketing fair are unreasonable. It is easy to generate unhealthy trends and even provide opportunities for speculators. For example, the silver dollar exchange for wheat in the article is essentially not protected by law, and the price that Instructor Zhao paid for wheat is definitely not in line with the average market price. As for the price Instructor Zhao received for selling wheat, I am afraid it is even more...tsk tsk...no one would do a loss-making business.

But it doesn't matter. Wheat is hard currency, and everyone knows that. Silver dollars are also good things, and the more the better. When they exchange, neither side suffers.

Well, I wonder if the scene described above is clear enough?

To put it more simply, over-the-counter trading of Bitcoin means that someone has coins that they want to sell, and someone has money that they want to buy coins. The middleman matches the two and makes some money or coins by buying high and selling low.

It's just so common, there's nothing mysterious or special about it.

In the Bitcoin circle, over-the-counter trading is actually a very reliable transaction.

First of all, over-the-counter transactions eliminate the possibility of trading in "fake currency".

Because of the lack of transparency of the exchange, even though some bigwigs bought a lot of Bitcoin, it is still a big question whether there are any Bitcoins in the exchange at that time. Not to mention that if you encounter an unreliable exchange like MT.Gox, you will lose both your money and your coins, which is simply unbearable. Some exchanges even ask users to pay for the loss of coins after losing coins, which is really a weird thing.

Secondly, it greatly increases the circulation of Bitcoin.

OTC transactions are conducted privately by the public, just like Zhang Laohan secretly sold grain to the Eighth Route Army, entering the village in the middle of the night and quietly trading. No matter how powerful you Japanese devils are, you can't see it, and you can't catch it even if you want to control it. The "Five Ministries and Commissions" also stipulate that the public has the freedom to buy, sell or hold Bitcoin at their own risk. We just like OTC transactions, who cares?

Again, OTC transactions increase the usability of Bitcoin.

I exchanged some money today, can I exchange it for some physical objects tomorrow? It is entirely possible. The simplest circulation starts with "barter". I believe that the current OTC market is just the beginning. As long as the scale of OTC continues to expand, there will undoubtedly be more "subject matter" joining the Bitcoin market.

Finally, you can make money through over-the-counter trading!

Making money is a natural thing! OTC trading is not stealing, not robbing, not opposing the people or the party. Even if there is a high or low price difference, it is a market behavior! The ancients have already commented on the price: you say you are fair, I say I am fair, only God knows whether it is fair or not! In my opinion: making money is the fairest.

So do you think there are any problems with OTC trading? Of course there are some problems.

For example, in over-the-counter trading, you must first choose a reliable trader. The establishment of trust is actually very important. Have you ever bought a mobile phone from a pedestrian on the side of the road at a train station? Of course, only an unreliable thief can do that. Whoever buys it will be deceived. But if your colleague is tired of the new Apple and wants to change to a Huawei, and sells the phone to you at a discount, would you consider buying it? A certain degree of trust can ensure the safety and reliability of transactions.

After solving the trust issue, the next issue is the transaction speed. OTC transactions are definitely not as fast as those conducted in exchanges. Why? You need to stock up. Money does not fall from the sky. After all, the number of Bitcoins in the private market is limited. It needs to be collected and sorted for sale. Sometimes you can’t buy it whenever you want... If the price of the currency rises or falls sharply after payment, this... This needs to be properly considered. It is better to lock in the price of the currency when it is stable.

There is one last problem when participating in OTC trading... that is the IQ problem. You need to know how to use a Bitcoin wallet for OTC trading. Don't laugh, many people really don't even know how to use a Bitcoin wallet... This is the most basic knowledge of Bitcoin. Of course, after you know how to use a Bitcoin wallet, there are still problems such as how to save passwords that need to be solved. If you forget your Bitcoin wallet password, hehe, I'm afraid you will be doomed, and even a living god can't help you. To participate in OTC trading, you need to be familiar with the most basic knowledge of using Bitcoin, and it would be even better if you have some common sense of cryptography!

Sima Qian, the historian, once said: The world is bustling with people, all for profit; the world is bustling with people, all for profit. Looking at the bustling Bitcoin OTC transactions, it actually reflects from another aspect that Bitcoin is gradually entering thousands of households and heading towards an increasingly prosperous future!

What? You said you still want to see what happened to Old Man Zhang?

Later... Later...

As for the fact that the rich peasant Zhang Lao was suppressed during the Three Antis and Five Antis Campaign after the victory of the revolution, and was shot in the head by Instructor Zhao himself, that is another story entirely...