Why is an OTC crypto desk important?

‘Large-scale buyers and sellers of cryptocurrency are far better suited to trading through OVEX because we’re able to offer instant liquidity and execution on very large blocks’: Jon Ovadia, CEO of the crypto exchange.

CIARAN RYAN: If you’re a wealth manager or high-net-worth individual, there’s a good reason why you would want to purchase cryptocurrency through an over-the-counter or OTC desk such as [that] offered by OVEX. If you’re buying 20 or 100 Bitcoin through a normal exchange, you’re going to run into a variety of logistical problems. Your order will be split up into several smaller orders and you’ll not get a consistent price – and it may take hours or even days to fulfil the order, so you’re subject to price fluctuations in the meantime.

So what is an over-the-counter desk, and why is it important? Joining us to discuss this is Jon Ovadia, CEO of crypto exchange OVEX. Welcome, Jon. Good to talk to you again. Can you explain why wealth managers are better off dealing through an OTC desk?

JON OVADIA: Hi Ciaran, sure. Large-scale buyers and sellers of cryptocurrency are far better suited to trading through OVEX because we’re able to offer instant liquidity and execution on very large blocks. So, for example, if an institution wants to buy, let’s say, R100 million of Bitcoin, that kind of liquidity is unavailable anywhere in the market except for OVEX.

If you want to go and do that on one of the exchanges’ order books, it will take you days. It will have a significant effect on the price of the coin in the market. For example, if you execute a R10 million block on one of the exchanges today, you will likely push the price down by about 1%, 1.5% at least, whereas with us you won’t; you’ll get instant execution, one price on up to as much as R150 million/R200 million buying or selling.

That’s a significant service that’s required in the market today because so far most of the players in the market have been retail mom-and-pop shops doing R1 million, R2 million kind of trades. But now the institutions are starting to come online, and many have very wealthy individuals and asset allocators and the likes [who] are starting to allocate a portion of their portfolios to crypto. That means that billions, if not tens to hundreds of billions of rands will be flowing into and out of crypto monthly.

Because of that, there’s a big, big demand for that kind of service now.

CIARAN RYAN: Are you seeing a lot of uptake from wealth managers and what we might consider institutional investors, who normally would be fairly shy about getting engaged with cryptos, now starting to look at it and wanting to know where they can buy a decent chunk of crypto in one fell swoop, like you’ve just described?

JON OVADIA: Absolutely. We’ve seen quite a few institutional clients coming online now, buying and selling serious size [orders], and it seems to be increasing rapidly – the number of players that can trade very, very large blocks on a daily basis.

CIARAN RYAN: Okay. I see OVEX has expanded the range of altcoins available through your OTC desk, and you’ve got coins like Shiba Inu, and Solana. You’ve got quite a few of these now very popular up-and-coming coins. Just run through one or two of these new additions, and why you decided to add them.

JON OVADIA: We decided to add them primarily from market demand. We had lots of clients, customers, people asking for these coins. Why we add any new coin is simply because there’s demand for it in the market, or we ourselves back the project and we believe in it, and we think that it’s going to make a difference or an impact in the world, and we want to let South Africans get access to those opportunities.

Shiba Inu was purely a market-driven play. We don’t have any specific view on it. But things like Keeper Fixed Forex – that’s a very, very interesting project that we recently listed, which is essentially on-chain forex [OnChainFx]. The Keeper token does two things. One, it backs on-chain forex and then, two, it backs decentralised DevOps jobs, which is a complicated concept. Essentially it provides upkeep on decentralised applications; an essential part of any technology infrastructure is a DevOp, which is developer operations keeping the system up and running. This doesn’t exist in DeFi and in crypto yet.

Keeper is really the first project to do it. It’s quite revolutionary, ground-breaking; it’s very difficult to understand, and I think that’s why it hasn’t received much attention to date. That’s one very interesting aspect of Keeper. And the Fixed Forex aspect of the Keeper token is an on-chain forex solution to trade and hold and earn yield on all different currencies. So it’s one interesting project.

There’re a few other ones that we’ve listed that are also quite interesting, but that one stands out.

CIARAN RYAN: Yes. Keeper – the price has shot up in the last few months. It’s very volatile and it does seem to be, from my reading of it, there to reward developers who are developing apps on the Ethereum blockchain. But of course, it’s available to trade for ordinary people as well, through OVEX. It’s been an extraordinary project in terms of the price gain that you’ve seen in the last few months.

JON OVADIA: Yeah, absolutely.

CIARAN RYAN: Can anyone place an order through the OTC desk or is there a minimum order size required?

JON OVADIA: For the OTC desk the minimum order is R250 000. [But] anyone can trade on OVEX – no minimum. You sign up, you deposit your capital, you can go to our Buy and Sell page, and you get access to this great array of assets and the great pricing. There are no fees charged there. And then, like I said, the prices are very, very competitive, especially when you start going above R1 million; R2 million will be the cheapest place to buy it. There’s no minimum there on the website.

When you go above the R250 000, then you can trade on our WhatsApp group; you’ll have access to dedicated sales traders who will hold your hand, walk you through the execution of any trade you want, any size you want, any coin you want. That service is [for trades of] R250 000 minimum. We do make exceptions for people who are very active. So, for example, if you are trading R100 000 three times a day, we’ll service you on the private OTC list. The problem is it’s very expensive to have these dedicated traders and account managers for every client, so we believe under R200 000 is good to trade on the platform. It’s a very, very good experience as well. Simple, no fees, a wide, wide range of assets, [with] very deep liquidity on all those assets.

So even [on] some other exchanges, if you want to buy some random new coin, even small orders can have massive price impacts; even a R50 000/R60 000 order can push the price down 1%, 2%. You won’t experience that with us at all. And if you’re doing a higher volume, then you get that white-glove service as well, and you can get any coin you want, any volume you want, and 24/7 support.

CIARAN RYAN: Let’s talk about the security aspect of trading through an exchange. Now this is something you’ve put a lot of attention on, and invested quite heavily in, because people are concerned. If they are going to be trading cryptos, how safe is it? Can you just talk about that?

JON OVADIA: At OVEX we manage it a little bit differently from other exchanges because we are dealing with higher-volume clients, not necessarily people looking to maybe buy in or withdraw instantly or something like that. Or, if they’re high-volume they can do that, but we’re able to spend a lot more money on those clients.

So the way our custody system works – and that’s what it comes down to – is custody. How do you hold the assets of people trading on your platform? Our custody is 100% offline. We partner with some of the biggest industry leaders. We partner with Ledger Vault. Ledger Vault does the hardware wallets. I’m sure most of the listeners, anyone in crypto, have heard of ledger wallets. Ledger Vault is the enterprise solution. It comes with $100 million on insurance cover. So we’ve partnered with them.

We’ve also recently partnered with Fireblocks, another industry leader. Fireblocks is only for institutions. It provides the back end for the likes of Revolut, one of the biggest neobanks in the world, and many institutions are using Fireblocks. So we partner with Fireblocks as well. That comes with a $30 million cover.

With both solutions, we’re able to ensure that 100% of our funds are offline. So, when clients come and deposit money, buy crypto, they know that even in the worst case of a security breach no one would be able to drain the OVEX wallets. It would require a very, very sophisticated attack that’s almost impossible.

Because of that, we believe our custody system is by far the most secure.

And then it has slight drawbacks. For example, withdrawals can take up to an hour. If you’re doing large block trades and you’re on the WhatsApp group … you can always request your withdrawal be sped up by the OTC team, and they’ll chase up an account to release it. The reason it’s a bit slow is because multiple people are required to sign every transaction to release the funds, as well as you, the user, having to submit them.

If you’re doing smaller trades, it can take up to 24 hours. But the benefit of that is you know your funds are always 100% safe, and you never have to worry about a hack or something like that – having your funds stolen.

Another benefit of that, of it taking a bit longer on your smaller trades, is that if your account is compromised in the worst, worst case, the funds don’t disappear instantly. You have a bit of time to react and report the incident. So it comes with slight drawbacks. We don’t think it’s a problem, because there is no reason why people need to desperately get their funds off OVEX. We have every asset that they’d want to trade. We have 24/7 liquidity, and we’re going to be adding a lot of interesting new features like margin, where they’ll be able to use leverage and the likes of that.

If you want to move it to, say, DeFi or somewhere else, it’s never usually an urgent, urgent thing or [something that] must be done instantly. However, if it is, and the volume is big enough, our team is available to release that instantly as well.

CIARAN RYAN: Okay. Final question here. What can we expect from OVEX in the new year? I know you’ve got some exciting plans in the pipeline. Tell us about one or two.

JON OVADIA: Awesome. We’ve got a lot of exciting stuff coming down the line for us. The most exciting thing is our international expansion. We’re moving across Africa. We plan to be in between 20 and 30 countries by the end of next year. That’s very exciting for us. It will also create synergies for people outside South Africa wanting to remit money into South Africa – something like that. You can now send it through OVEX. It will be instant. It will be at a premium, which is fantastic. So you’ll get like 2% or 3% better than you would if you were to send money through the bank. That’s one interesting, exciting opportunity.

We recently acquired a financial FSP [financial service provider licence], which allows us to do forex through the bank for clients; it allows us to do stocks and bonds and warrants, debentures – that kind of stuff. So we’re exploring that offering for South Africa. I think that will be quite exciting. Forex is already available, so our clients can contact us again. The volume needs to be relatively high, so above R100 000 for the forex, but there we have a fully forex solution. And [there’s] a lot more, which I wish I could speak about right now, but we’ll definitely be speaking about in the future.

Then some exciting stuff that we’ve done recently is the listing of this Keeper and Fixed Forex. So we’ve listed stablecoins for pounds, euros, Swiss francs – a few different stablecoins. These are backed by cryptocurrency and backed by hard currency anywhere in the world – that’s quite an exciting project.

Now South Africans can get access to all these different currencies through OVEX, as much as they like, hold it in OVEX and then sell it for rands when they’re ready.

Soon we’ll be adding interest accounts, crypto interest accounts for all those currencies as well, which is very exciting. We are expecting very good yields at north of 10% starting. So that will be good. That’s some exciting stuff.

What else is interesting? There’s a ton of stuff I wish I could speak about, but we’ll be coming out with a lot of exciting announcements soon.

CIARAN RYAN: Okay, we’ll stay tuned for that one. We’re going to leave it there. Jon Ovadia is CEO of OVEX. Thanks very much Jon.

Brought to you by OVEX.

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