But perhaps the greatest advantage of switching to an OTC is the protection from what is called price "slippage".
Slippage occurs when an investor sells a large piece of bitcoin at once on a public purse, causing the bitcoin's price on trading to fall as the order is placed. When the order is completed, the investor may end up selling at a lower price than expected.
Horsley said a bitcoin order of a few million dollars could often cause a 5-10% price shift on a public exchange. But that number improves the slippage rate from 0.5% to 2% on an OTC bank, he said, allowing Square to move bitcoin blocks into one big transaction.
"Prices, net of fees, are often better, especially for large orders," he said.
Transfer trades were also likely to be motivated by the desire to be more complacent, said Demirors of CoinShare. The nature of Square's business attracts a lot of scrutiny from regulators and banks, and collaboration with OTC desks and private intermediaries, which are generally perceived as "much lower risk", can work in its favor. He said.
It is not clear which OTC have collaborated with Square so far. In June, Genesis Trading, a bitcoin brokerage company owned by Barry Silbert's Digital Currency Group, announced its partnership with Square shortly after Square obtained a virtual license from the New York Department of Financial Services.
Square launched its bitcoin trading service for limited people in the fourth quarter of 2017, and made available to the public in the first quarter of this year. Both the price of Bitcoin and the share price of Square have increased since the launch of its bitcoin service.
Despite these moves, Square is not making much money from its bitcoin service. In the second quarter, Square earned about $ 400,000 in profit on $ 37 million of bitcoin transaction revenue. This is a slight improvement from the previous quarter when it made a profit of $ 200,000 over $ 34 million in bitcoin revenue.
During an earnings call with journalists, Square CFO Sarah Friar said the bitcoin service should not be a huge growth driver at any time
"It's not an important monetization engine," he said Friar. "The goal is to keep driving the utility in the Cash app."