Why the real BTC volume is much lower than you think

Furthermore, these exchanges trade at a very tight spread, suggesting a uniform and highly connected market. Sustained arbitrage opportunities lasting greater than 100 seconds are extremely rare, and the average deviation in price is below 20 basis points for nine of the ten exchanges.

Most of the trading volume takes place in Malta and the US with each jurisdiction accounting for 40% and 30% respectively.

Another key takeaway from the Bitwise report is that the CME and CBOE futures volume is significant compared to the actual spot volume. In fact, the two firms rival combined are comparable to the largest spot exchange Binance, each with $91m and $110m respectively.

Nine of the top ten exchanges are registered as a Money Services Business in the US, and five of them are regulated under the New York Department of Financial Services’ BitLicense.

Bitlicense requires more stringent compliance than MSB regulation. Additionally, many of the top exchanges are using sophisticated market surveillance tools and protocols. 

OTC trading desk

There are several OTC trading desks and market makers for the cryptocurrency market. For instance, Jane Street and Flow traders have become active traders of the top five cryptocurrencies as they are authorised market participants and market makers for the AMUN ETP products and the XBT Provider’s ETPs.

Last year alone Goldman Sachs-backed Circle processed over $24bn worth of OTC trades across 10,000 trades. Each trading house has a different minimum order limit; however, trade sizes are typically larger than $100k. The largest US-based cryptocurrency exchange Coinbase also has an OTC desk.

Additionally, Susquehanna International Group, one of the world’s largest investment firms has been offering OTC services to its clients since 2016. These OTC desks often operated 24 hours a day and are based all over the globe. Bitcoin Suisse and Xapo are both headquartered in Switzerland and manage proprietary trading arms as well as custodial solutions. OTC trading has been a popular way for HNWI and institutional investors to accumulate Bitcoin over the past year. This section highlighted just a few of the dozens of firms moving billions in notational volumes annually.

Custody solutions

Bitcoin is a cryptographically secured digital asset that uses public key cryptography to track ownership. Public key cryptography involves two keys: A public key that is like a safety deposit box and a private key that is like the key to that safety deposit box. Whoever owns the private key, therefore has access and ownership rights to the contents of the public key. Keys are just digital strings of letter and numbers. Hence custody of a cryptocurrency like Bitcoin merely is about safeguarding the private keys associated with the public keys that hold the Bitcoin in question. 

There are now several regulated, insured, third-party crypto custodians. Below is a list of US-based custodians; however, there are custodians in almost every major jurisdiction. For example, Crypto Facilities AG is the chosen custodian for the SIX stock exchange.