Why so many BTC OTC deals fail

The large-block BTC market has two layers. The first is the professional one: OTC desks, market makers and custodians that execute trades for funds, miners, companies and high-net-worth holders every day, quietly and at tight prices. The second is a much larger, informal layer of brokers, “mandates” and facilitators passing offers to each other through messaging groups. Most of the deals people hear about come from this second layer, and most of them never close.

Industry participants have said so openly. In 2018, a trader at GSR estimated that 99% of OTC deals do not go through, and QCP Capital’s co-founder said that “99.99% of the notorious ‘I-have-10,000-BTC’ deals are fake.” Little has changed since. The reasons are structural, and they are worth understanding for anyone on either side of a real transaction.

1. The daisy chain

A typical informal deal does not start with a seller. It starts with a message: someone knows someone who represents a holder with 5,000 BTC to sell. That message is forwarded to another broker, who forwards it again. By the time it reaches a potential buyer, there may be five, eight or more people between the two principals, and none of the intermediaries has met either one.

Each person in the chain protects their position. They ask for non-circumvention agreements and fee protection before revealing who they are talking to, and they block direct contact between buyer and seller in case they are cut out. The result is a chain where:

• nobody can confirm that the seller exists or controls the coins;
• every question and document takes days to travel up and down;
• information is distorted at each step, so price, volume and procedure change between one end and the other;
• the principals, if they are real, lose patience and walk away.

2. Everyone in the middle expects to get rich

The chain exists because of the numbers involved. At a BTC price of $100,000, a 1,000 BTC block is worth $100 million, and half a percent of that is $500,000. For an intermediary, a single deal of this size looks like it could change their life. Many people in these chains believe that this is the one transaction that will make them a multi-millionaire.

That belief drives behaviour that kills the deal. Nobody wants to reduce their fee, nobody wants to step aside, and new people keep joining because each believes they add value. The fees add up:

Illustrative example. The desk spread is based on an industry comparison of OTC desk pricing.

This is the core problem. A real seller can sell a large block at an OTC desk at close to the market price, and a real buyer can buy one the same way. A chain that needs 3–4% in fees cannot compete with a desk that charges a fraction of a percent. The only way the chain can offer something attractive is to promise a price that no real seller would accept.

3. Discounts that cannot exist

Many informal offers advertise BTC at 5%, 10% or more below the market price. No genuine holder of a liquid asset sells at a large discount when desks will buy the same block at close to the market price within a day. An offer far below the market means one of three things: the seller does not have the coins, the coins cannot pass compliance checks, or the offer is a setup for fraud.

The fraud risk is real. The FBI’s Internet Crime Complaint Center recorded $11.4 billion in cryptocurrency-related fraud losses in 2025, a record, including $7.2 billion from investment fraud.

4. The “who goes first” deadlock

Even when both sides may be real, informal deals often stall on procedure. The seller’s side asks for proof of funds, a bank letter or a signed purchase order before showing anything. The buyer’s side asks for proof of the coins before showing funds. Each side suspects the other of being a time-waster or a fraud, often with reason.

The proof offered is frequently worthless: wallet screenshots, balance printouts, documents referring to banking messages or instruments that cannot be verified, or a tiny test transfer from an address that says nothing about who controls the rest. Weeks pass in exchanges of paper while the market price moves, and the agreed terms stop making sense for one side.

5. Compliance comes last instead of first

Every reputable desk, custodian and bank requires full identification of the parties, their beneficial owners and the source of the funds or coins before trading. In informal chains, the parties often resist this until the end, because disclosure removes the intermediaries’ leverage or because the answers are not good. When compliance finally happens, it often ends the deal: the seller cannot show where the coins came from, the funds cannot be traced, or a party turns out to be unable to pass sanctions and background checks.

How a deal that closes actually works

Real block trades look very different:

1. Short chain. Principal to principal, or through a single mandated representative whose written mandate can be confirmed directly with the principal.
2. KYC first. Both sides are identified, with beneficial owners, signatories and source of funds or coins, before any price is discussed seriously.
3. Proof that can be verified. The seller proves control of the coins by signing a message chosen by the verifier with the private key of the address. Funds are confirmed bank-to-bank, not by a letter sent by email.
4. Market-based price. The price is set against a reference at the time of execution, with a small, disclosed spread or fee.
5. Secured settlement. Coins and funds move through escrow or a regulated custodian, or simultaneously, so neither side has to trust the other to go first.

Checklist before you spend time on a BTC OTC deal

• Count the people. Ask how many intermediaries stand between you and the principal. If nobody can tell you, the answer is too many.
• Ask for the mandate. A representative should be able to show a written mandate that you can confirm with the principal.
• Check the price. A discount of more than about 1–2% below the market price on a liquid asset should be treated as a warning.
• Refuse screenshots. Accept only a signed message from the address or confirmation through a custodian.
• Do KYC at the start. A party that will not identify itself early will not pass compliance later.
• Add up the fees. Ask for the total paid to everyone in the chain, in writing. If it is several percent, the deal will not work.
• Never send funds or coins first. Use escrow, a custodian or simultaneous settlement.

This article is for general information only. It does not constitute investment, legal or tax advice, or an offer to buy or sell any asset. Figures are taken from the public sources listed; the fee example is illustrative.