Vinny Lingham Explains – Here’s How the 1% Buy Bitcoin

The OTC market has continued to grow, and there are an estimated 10–15 formal OTC brokers out there for Bitcoin with any real volume, and maybe 3–4 who are more well known and trusted, such as Harry Yeh of Binary Financial and a few more referenced by Wong Joon Ian in his Coindesk post, (which is well worth reading) on OTC Bitcoin trading. In the case of LocalBitcoins, they deal with smaller transactions but many exchanges also facilitate larger trades, off-book.

Many of the very wealthy individuals that I know who are looking to get into Bitcoin are not going to the exchanges. The limits are not significant enough for them. If a High Net-Worth Individual (HNI) has a net worth of $100m and wanted to place just $1m of that into Bitcoin as a hedge against market disruption, it would be imprudent of him to place that order on the open market. That is a single trade of over 1,000 BTC and it would push his price up (called slippage) significantly. Instead, he would call a broker, agree on a price (typically a few dollars above market spot price), and then perform the trade outside the market. The broker would match buyers and sellers and the exchange volume would not reflect the buying or selling activity for that trade. Now, imagine if a billionaire wanted to allocate 0.5% of his or her assets to Bitcoin. That is simply not possible on exchanges.

Read more here.