Crypto trading firm and market maker Wintermute recorded a 240% annual growth in traditional financial firms activity in its over-the-counter (OTC) trading desk, according to a January 17 report. report.
Traditional financial institutions played a critical role in reshaping OTC trading by 2024. The report pointed to improved regulatory clarity and evolving policy frameworks as trust drivers for these institutions.
The report emphasizes key factors, including the US Securities and Exchange Commission (SEC) approval of spot Bitcoin (BTC) exchange-traded funds (ETFs) in January 2024 and the election of a pro-crypto US president in November.
Preference for discrete transactions
Wintermute’s counterparty volume data showed that retail brokers also experienced a growth rate of 549%, reflecting broader institutional interest.
The increase in trading volumes of institutional players can be attributed to their increasing demand for off-exchange liquidity. Wintermute’s OTC desk saw volumes grow 4.13x last year, thanks to counterparties looking to place large trades without significantly impacting the market.
The demand is consistent with institutions’ preference for efficient, discrete transactions that avoid the capital inefficiencies associated with holding assets on exchange platforms. Preference drove Wintermute’s OTC volumes reach new milestones, surpassing the previous weekly record of $2 billion in 2023 with single-day volume of $2.24 billion in November 2024.
Focus on memecoins and challenges
Traditional financial institutions have also shifted their focus when it comes to preferred assets. While major cryptocurrencies experienced a 3% decline in trading volume, alternative segments such as ‘memecoins’ and ‘currency networks’ gained popularity.
Memecoins recorded a growth of 210%, accounting for 16.2% of Wintermute’s total OTC volumes, up from 7.3% in 2023. This reflects the willingness of institutional investors to explore higher-risk assets for additional returns.
In particular, the report noted that as traditional financial institutions consolidated their presence in the OTC market, crypto-native companies faced increasing pressure.
The arrival of well-capitalized players with access to scale and competitive pricing put pressure on smaller competitors. Declining market shares for crypto-native companies indicate an intensification of competition, with institutions deploying their resources to dominate the space.