The crypto market has become a highly fragmented landscape, with over 700 trading venues worldwide. While this fragmentation breeds competition and innovation, it also brings challenges like liquidity dispersion, execution inefficiencies and regulatory uncertainty.
To help institutions navigate this complex environment, Finery Markets, in collaboration with Cointelegraph Research, has released a new report: Crypto OTC Trading Report 2024
This report looks into the evolving landscape of institutional crypto trading, focusing on OTC markets, trading technology, liquidity providers and regulatory trends. Below are some of the key findings from our research.
Market fragmentation: a two-edged sword
Market fragmentation occurs in multiple ways—between CEXs and DEXs, and within OTC trading platforms. While competition among venues can lead to price discovery and cost reduction, it complicates liquidity aggregation, forcing institutions to use SORs and ECNs for execution optimization.
According to our research, institutions are increasingly adopting multi-venue strategies to address fragmentation, but this comes with extra costs and complexity.
Institutional OTC trading on the rise
One of the most notable findings from our survey is the 100%+ year-over-year growth in OTC crypto trading volumes. Unlike on-exchange trading, OTC markets offer customised execution, deep liquidity and better privacy, making them attractive to large institutional investors.
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Institutional Demand: More hedge funds, asset managers and proprietary trading firms are entering the crypto space.
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Market Infrastructure: Electronic trading platforms and real-time risk management tools are improving execution.
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Regulatory Clarity: Jurisdictions like Singapore, Switzerland and the UAE are developing regulatory frameworks for institutional digital asset trading.
Technology & regulation
As institutions grow, trading technology and compliance frameworks are getting more sophisticated. Our report looks into:
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AI Trading: Over 70% of firms are using AI-powered analytics, for market data analysis to trade execution optimisation.
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Liquidity Provider Strategies: Market makers are using hybrid trading models to balance price discovery with risk management.
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Regulatory Evolution: A whopping 92% of institutions plan to get additional crypto trading licenses in 2025, as the industry becomes more compliant.
What’s ahead for institutional crypto players?
The report highlights key themes that will shape the market:
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Mergers and Acquisitions: Crypto trading infrastructure M&A is accelerating as the market matures.
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Hedging for Institutions: Options and futures are the preferred tools for risk management, but new structured derivatives for institutions could emerge.
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AI’s Growing Role: From front-office execution to back-office automation, AI will transform institutional crypto trading.
Download the report
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