Over-the-counter (OTC) trading is not unfamiliar in the cryptocurrency industry, especially compared to the Bitcoin inscription market. In the early days of the inscription market, the speed of capital entry far exceeded the speed of information circulation. Taking advantage of the information asymmetry created by various barriers, the OTC market has become the "most profitable business" in this field.

During the stage of wild growth, some people became rich overnight while others suffered losses and fled. Regardless of praise or criticism, off-exchange traders are undoubtedly a key component of the rise of this emerging market. In the absence of public trading infrastructure, they supported the circulation of funds and public opinion in the inscription market. As the infrastructure of the Bitcoin ecosystem gradually becomes more abundant and complete, where will these off-exchange traders go in the present and future?

有人卷钱跑路，有人一纸成名

translates to

Some people run away with money, while others become famous with just a piece of paper

During the early days of Bitcoin's inscription trading, the infrastructure was always lagging behind. Apart from the earlier Unisat, the community could only turn to OTC off-exchange traders to trade inscriptions. However, OTC transactions are ultimately about trust, and in the early market, everyone seemed to be "taking chances". Some people bought ORDI at a low price and enjoyed a thousand-fold increase, while others returned empty-handed because the counterparty ran away.

Former "Off-Exchange King" Takes Away $6 Million Worth of ORDI

On the eve of ORDI's upcoming breakout, the first BRC-20 fraud case involving a sum of over one million occurred.

Bzz.eth, who was once known as the top player outside the arena by some old ORDI players, manages multiple BRC-20 OTC groups as a group owner. However, he ran away with 100,000 ORDI from victims. According to the current price of 60 USD per ORDI, the "robbery" amount has reached 6 million USD. The community discovered that Bzz.eth claimed to buy ORDI at a high price using a small account, but suddenly cancelled the transaction after the seller transferred the money. He also refused to return the currency, citing "invalid Transfer inscription" as an excuse to shirk responsibility, thus taking possession of these 100,000 ORDI.

The process of swallowing coins and the subsequent discovery that they were done by the same person.

Not only that, many community members also accused him of charging high guarantee fees and passing different price information between buyers and sellers to take the difference. In March, BlockBeats had contacted Bzz.eth to learn about the emerging Bitcoin inscription market. At that time, the Bitcoin ecosystem was not too prosperous. According to Bzz.eth, the average transaction amount per transaction was 300U, and there were about 20 transactions per day. At that time, this transaction amount was not large, but it was almost the first OTC trader that most community members had contacted.

With the development of the situation, the WeChat and Twitter accounts of Bzz.eth's "Wealth Research Institute" have been cancelled. Due to the difficulty of investigation, victims of ORDI did not go to Bzz.eth for trouble when the price was low. However, with the launch of ORDI on Gate on May 8th, the price of ORDI quickly soared to $17.04. As the value of ORDI continues to rise in the market, the amount of losses has also increased significantly, and the severity of the incident has also changed. BlockBeats learned that the victims have only recovered 10,000 ORDI from Bzz.eth, and Bzz.eth himself has not been criminally detained.

One quotation, achieve success and fame

Before Cai Bai, there was no quotation mode in the Bitcoin OTC ecosystem. At that time, the operation mode of the Bitcoin inscription market was also unclear: there was no fixed quotation list, and buyers needed to inform the group owner or administrator when they wanted to buy a certain asset. Then, the administrator would announce a buying price in the group, and the transaction relied entirely on the negotiation between the buyer and the seller.

At that time, Cai Bai was still a small player in the inscriptions OTC circle. When he saw the market gap in this area, Cai Bai proposed his idea to Bzz.eth, hoping that Bzz.eth and other off-exchange traders would adopt this quotation model. However, Bzz.eth was not interested in this matter, so Cai Bai designed his own buy one to buy five, sell one to sell five quotation sheet and started his own OTC business.

Quotation

It has been proven that there is a strong demand for open and transparent information in the market. After Cai Bai established his own group, it quickly attracted a large amount of attention. In less than a week, the group was full and quickly developed into three or four groups. The quotation sheet established a great reputation for Cai Bai's work in the Bitcoin OTC ecology in the early stages, and it quickly developed and even recruited several assistants. Later, when doing Atomicals, Cai Bai was also recognized by the market as the best OTC trader.

For traders, this type of quote is extremely important as there is no clear market pricing mechanism in the OTC market itself, and traders often lack clear expectations of prices. Therefore, providing accurate quote information is particularly crucial and also increases market transparency.

After one month of working in OTC, Cai Bai briefly reviewed his experience, "Starting from scratch, I managed to become the largest OTC at the time with a daily trading volume of up to 10 BTC. I am truly grateful for the trust and support of many friends."

Eating price differences, setting prices, and grabbing business orders: the business world of Mingwen OTC

In fact, most of the inscription off-market traders are not willing to publicly disclose their so-called price lists. After all, in such an extremely early market, the main means of obtaining high returns is to take advantage of information asymmetry. Any increase in transparency means less money that can be earned.

Black Box

During the early stages of the inscription market, merchants who provided off-market inscription trading were called "guarantors". The buyer and seller would transfer funds and assets to an intermediary guarantor, who would then transfer the assets to both parties after confirming their accuracy.

As a matchmaker for transactions, over-the-counter traders play an extremely important role in finding a price point that both parties can accept. For example, if the buyer's bid is $100 and the seller's listed price is $300, the OTC trader needs to bring both parties to a compromise at a price of $200.

However, the early inscription OTC market was not transparent, and guarantors did not even need to create a bargaining group for the two parties to the transaction. In this case, guarantors had the opportunity to "eat the price difference" and often secretly swallowed the middle price difference through their own payment address, while the buyers and sellers were unaware. For example, if the seller listed at $100 and the buyer offered $120, the $20 price difference in between became the profit of the off-exchange trader.

Externally, the guarantor relies on charging both parties around 4% in over-the-counter transaction fees to generate revenue. However, in reality, the profits obtained through the spread are the main source of income for most guarantors. In opaque situations, insiders have reported that profits of around 50% of the transaction amount can even be obtained.

Other than taking advantage of price differences, "placing fake orders" is also a common tactic used by many over-the-counter traders.

The guarantor will post a huge amount of fake sell orders at extremely low prices, triggering panic in the market and causing other sellers to sell their assets at even lower prices. The guarantor will then have the opportunity to buy at a low price. If other buyers who want to enter the market at a low price come, the guarantor will use the excuse of already having a deal or canceling the order to cover up.

"In short, OTC traders have the final say," said a well-known OTC trader. "The biggest power of OTC is actually the ability to influence market trends. Due to information asymmetry, they can easily manipulate the market."

Is OTC, can also be "market maker"

Unlike other off-exchange traders, in addition to OTC trading, some inscription off-exchange traders have also taken on the role of "market makers" in the market.

Unlike simple OTC trading, market makers sometimes need to use their own funds to actively absorb liquidity to maintain market stability and confidence in addition to market prices.

This pond's water can only be stirred this much, any larger and there won't be too much OTC involved.

In mid-November, there were multiple "zero yuan purchase" incidents on Atomicals Market. According to statistics, all 33,000 atoms that were lost in the previous two "zero yuan purchase" incidents. Despite numerous facts and evidence pointing to security issues with AM, and many community users calling for official intervention, AM initially seemed unwilling to take responsibility and even considered giving up its operations.

In order to handle this incident in a public relations manner and reduce the negative impact on the Atomicals community, some core community members, off-exchange traders, and wallet developers of the Atomicals protocol negotiated with Atomicals Market as representatives. Fortunately, after various matchmaking and negotiations by community members, the original founder of Atomicals Market stepped down and the team was transferred and replaced. The new team also completed full compensation after the handover was completed.

It can be seen from this that over-the-counter traders have made contributions to the development of the Bitcoin ecosystem.

At the same time, various Bitcoin ecological protocols have their own dedicated trading platforms, including the improvement of the Unisat market and the continuous follow-up of the OKX Web3 wallet, which gradually reduces the market capacity of off-exchange traders. So where did off-exchange traders go after the market capacity shrank?

Until today, in the Bitcoin ecosystem, there are currently few people conducting OTC transactions, and most people have stopped this activity. The market has become more mature and no longer requires OTC transactions.

Cai Baiye also admitted that there is a certain risk in terms of policy when an OTC becomes too large, especially in the domestic environment. Therefore, as Atomicals Market gradually matures and real users are directed towards Atomicals Market, there is no need to continue.

"After no longer engaging in OTC trading, I returned to my previous state, researching new projects and making some investments," said Water.

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