Block Trade: A Compelling Alternative for Institutional Crypto Traders

You may be familiar with block trades in traditional finance. In the world of stocks and securities, trading large quantities can create significant price movements on public exchanges like Nasdaq. To prevent volatility, investors or traders may choose to place block trades OTC (over the counter) or in the private market instead. 

Similarly, in the cryptocurrency world, where assets with high market capitalization, such as Bitcoin (BTC) and Ethereum (ETH), are traded, colossal transactions can also cause substantial market fluctuations. This has led to the introduction of block trades in crypto.

This article discusses everything you need to know about block trades in the evolving world of cryptocurrencies.

Key Takeaways:

• Block trades enable investors to execute large transactions discreetly, minimizing price fluctuations and slippage.

• Block trades often come with reduced transaction fees, with Bybit’s P2P Block Trade service offering zero fees.

• Block trading can involve regulatory risks, as OTC and private platform trades in crypto often face less regulatory oversight.

What Is a Block Trade?

A block trade is a large order between two transacting parties. In both traditional finance and crypto, block trades are typically used by institutional investors, such as investment banks, real estate investment trusts and crypto hedge funds, to conduct large-scale transactions discreetly in order to avoid market volatility. However, block trades can also be carried out by individual investors. 

Block trades are usually made at a discounted price, and can be considered as a sort of private purchase agreement, as they often occur off the public exchanges or through private platforms.

Due to their sizable transaction amounts, block trades are risky. If the security’s or crypto’s price moves against the block trader, they may suffer significant losses. For this reason, it's imperative that block traders have a good grasp of both the market and the assets they’re trading.

Additionally, as block trades aren't subject to the same regulations as regular trades, they can be conducted without having to provide information about the trade. This lack of transparency has created controversy in the trading community, with some critics arguing that block trading gives larger investors an unfair advantage over the rest. 

Nevertheless, the fact remains that block trading is an essential part of modern financial markets, and plays a vital role in facilitating institutional investment overall. 

How Do Block Trades Affect Crypto Prices?

Block trades help mitigate price fluctuations by allowing large quantities of crypto to be bought or sold without causing major price movements in the crypto market. As block trades are typically conducted privately, institutional investors can avoid the volatility that would occur if they tried to trade the same quantity of crypto on the public market.

Example

Let's assume a hedge fund wants to buy $10 million worth of BTC. If the hedge fund places an order today for $10 million worth of BTC on a public exchange, the move would likely push up the price of BTC. By executing a block trade on a private platform, however, the hedge fund can buy the same amount of BTC without causing a ripple effect — orders are kept anonymous, and no order book is available to the public.

How a Block Trade Works in Crypto

Block trades are typically conducted as over-the-counter (OTC) trades or on private exchanges. 

OTC block trades are usually transacted directly between two parties. The trade is arranged through secure communication methods, such as encrypted messages. Once the trade is agreed upon, it will be executed.

Meanwhile, some cryptocurrency exchanges offer private trading options, such as P2P trading or dark pools, whereby large trades can be executed discreetly and often at more favorable prices.

Benefits of Block Trading

1. Price Stability: Block trading allows institutional investors to buy or sell immense quantities of crypto at a discount without causing a market swing.

2. Cost Efficiency: Transaction fees involved tend to be lower than trades conducted on the public market. For example, no exchange fee is required for dark pool trades.

3. Increased Liquidity: Block trades help to maintain market liquidity by enabling large trades to occur without impacting the market.

Risks of Block Trading in Crypto

1. Regulatory Uncertainty: Crypto is inherently riskier than traditional finance, since it isn’t subject to rigorous levels of regulation. OTC and private exchange block trades face even less regulation than public crypto exchanges. This lack of regulation means block trades carry a higher level of risk.

2. Challenging Execution: Block trades may involve sophisticated strategies and substantial amounts of crypto that may be complex to manage.

3. Higher Costs for Individuals: Retail investors may find it costly to engage in block trades, due to the considerable assets required for transactions.

Should You Try Block Trading?

Block trading may not suit everyone’s risk appetite. Additionally, retail investors usually don’t have the resources or the knowledge to conduct block trades. However, some advantages still exist for individuals with the resources to spend. First, block trading allows trades to be conducted swiftly, without having to execute multiple orders or wait for the exchange to match your orders. In addition, negotiating a price directly reduces the risk of slippage since the transaction price is predetermined between the parties, preventing unexpected price changes.

Additionally, Bybit has eased the block trading process for you with the introduction of P2P Block Trade, which allows you to execute swift and efficient trades without fees. Bybit’s P2P Block Trade also boasts excellent security, thanks to its rigorous KYC/KYB verification processes for both buyers and advertisers and its strict asset management protocols. You can rest assured that your large-scale transactions are in safe hands.

Find out more about the entry requirements for Bybit P2P Block.

How to Make a P2P Block Trade on Bybit

If you want to participate in Bybit’s P2P Block as a buyer, just follow the steps below.

Step 1: Click on Buy Crypto→P2P Trading on the top left corner of the navigation bar to enter the P2P trading page. If you want to buy USDT, then choose your preferred advertisement and click on Buy USDT. 

Step 2: Enter the amount of fiat you want to pay or the number of coins you want to receive, and click on Buy to proceed. You’ll be redirected to the order page, where you’ll have 15 minutes to transfer your fiat to the seller's bank account. Make sure to verify that all of your order details are correct before proceeding. 

Step 3: On the order page, check the payment method provided by the advertiser and choose your preferred method to make payment. You will need to go to your online banking or third-party payment application to transfer the fiat currency to the advertiser, according to the account information provided by the advertiser.

Step 4: Once you’ve completed the payment, return to your Bybit P2P order page and click on Payment Completed. Wait for the advertiser to process the coin transfer. Once the coins you've purchased have been successfully released by the seller to your Funding Account, you can click on View My Asset to verify them, along with your transaction history. 

How to Become a P2P Block Advertiser

If you join P2P Block as an advertiser, you get to enjoy certain privileges as compared to regular advertisers on P2P Trading. For instance, you’ll have double the order limit, with a single maximum order limit of 200,000 USDT, and your Block advertisements will receive priority placement in search results. Furthermore, you can have two types of ad listings — both Block advertisements and regular P2P advertisements — and you can create up to three listings for each type. You’ll also gain access to a pool of pre-verified and margin-backed traders, ensuring a secure and reliable trading experience.

If you wish to become a P2P Block advertiser on Bybit, you must deposit 50,000 USDT as an Individual Advertiser, or 100,000 USDT if you’re an Institutional Advertiser. On top of that, you’ll need to submit proof of individual/institutional financial standing with the required documents as listed below. Note that the review process usually takes two days.

The Bottom Line

In general, block trading can be a valuable tool for institutional investors, and even individual investors with sufficient resources, to execute substantial crypto transactions without disrupting the market. By using block trades, investors can avoid slippage, benefit from negotiated pricing and enjoy reduced transaction fees.

Bybit offers a P2P Block Trade service at zero fees for those interested in block trades in the crypto space. With P2P Block Trade, you can be confident in executing a sizable trade, thanks to the robust security we offer through rigorous KYC/KYB processes and excellent asset management protocols. 

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