South Africa based bitcoin exchange BitX has added new features to their exchange platform which will reduce slippage for larger trades and attract institutional investors who are looking to diversify into bitcoin using the South African Rand.
The BitX Exchange is a market platform where people can buy and sell bitcoin using rands (ZAR). Customers place orders to buy or sell at particular prices into the system. Whenever a buy order matches a sell order, a trade occurs. This is a standard practice across exchanges, however for traders who want to deal in large amounts, this introduces the problem of slippage.
For example if you wanted to sell a substantial amount of bitcoin, say 100 BTC, the first 1.223 BTC would get closed at 9220 ZAR/BTC but you’d get an increasingly weaker exchange – due to limited liquidity. The tail end of an order like that will only fetch 8000 ZAR/BTC, or 13.2% less, in what is called slippage. This will be the same for a trader who places a large buy order, but just on the other side of the depth chart, where they pay an increasingly higher price on their large transaction.
In order to help traders not run into this problem and get the maximum value of their trades, BitX is introducing over-the-counter (OTC) trading. As explained by BitX, the process will still match traders together but the process will be more manual and funds will be held in escrow until a match can be made.
By introducing OTC trading to the exchange, BitX will be attracting new traders such as institutional investors. This also helps with avoiding flash spikes and crashes in the order book. At this time, BitX has set a minimum OTC order of 25 BTC and you must be a verified user. All OTC orders are currently set at the mid-price (that is, the middle of the spread or the average of the best bid and ask).