How institutional traders trade?

<p id="isPasted">Institutional traders (banks, hedge funds, and asset managers) trade differently than retail investors by focusing on minimizing market impact and using sophisticated infrastructure to manage massive capital. As of 2026, their approach is defined by these core mechanics:&nbsp;</p><p><strong>1. Execution via OTC Desks </strong></p><p>To avoid "slippage" (pushing the price against themselves), institutions rarely buy or sell large amounts on public exchanges like a retail trader would.&nbsp;</p><ul><li>Over-the-Counter (OTC) Trading: For orders typically exceeding $500,000, they use OTC desks (e.g., Binance OTC, Coinbase Prime, or FalconX) to trade directly with a counterparty at a negotiated price, keeping the transaction private from the public order book.</li><li>Dark Pools: They may use private exchanges where order books are hidden, allowing them to cross large buy and sell orders without alerting the broader market. </li></ul><p><strong>2. Algorithmic Trading Strategies</strong></p><p>Institutions use high-speed automated systems to break large orders into thousands of tiny pieces, making them "invisible".&nbsp;</p><ul><li>TWAP &amp; VWAP: Algorithms execute trades based on Time-Weighted or Volume-Weighted Average Prices to ensure they get the "fair" market price over a set period.</li><li>Iceberg Orders: Only a small fraction of a large order is visible at a time; as soon as one piece is filled, the next part of the "iceberg" automatically appears.</li><li>HFT (High-Frequency Trading): Quantitative firms like Wintermute use algorithms to profit from micro-price differences in milliseconds, providing liquidity to the market in the process. </li></ul><p><strong>3. Advanced Tools &amp; Platforms</strong></p><p>Institutions use "Prime Brokerage" services that aggregate multiple exchanges into one interface.&nbsp;</p><ul><li>Unified Margin: Platforms like Bitget PRO allow institutions to use their entire portfolio (spot, futures, and tokenized assets) as collateral in a single account, maximizing capital efficiency.</li><li>Off-Exchange Settlement: Using services like Fireblocks, they can trade on an exchange without "pre-funding" it. Their assets stay in secure, regulated custody until the moment of settlement, reducing the risk of an exchange hack or collapse. </li></ul><p><strong>4. Strategic Objectives</strong></p><p>While retail often trades on "hype," institutional moves are systematic:</p><ul><li>Index Rebalancing: Buying or selling to match the weightings of an index (like a Top-10 Crypto Index).</li><li>Market Making: Acting as the "house" by providing both buy and sell quotes to profit from the spread.</li><li>Hedging: Using complex derivatives like options straddles to protect against price drops while maintaining their long-term positions.&nbsp;</li></ul>