Request for Quote (RFQ)

A Request for Quote (RFQ) in the context of cryptocurrency refers to a solicitation made by a buyer to potential sellers to provide price quotes for a particular digital asset or cryptocurrency. The buyer sends out the RFQ to multiple sellers, requesting them to submit their best price offers for the specified quantity of the cryptocurrency.

Example:

Let's say a cryptocurrency investor wants to purchase 100 Bitcoin. Instead of directly placing an order on an exchange, they may send out RFQs to several cryptocurrency exchanges or over-the-counter (OTC) desks. Each exchange or desk will then respond with their price quotes for selling 100 Bitcoin. The buyer can then compare the quotes and choose the most favorable one.

Case:

A hedge fund manager wants to purchase a large quantity of Ethereum for their investment portfolio. They send out RFQs to multiple cryptocurrency exchanges and OTC desks, specifying the quantity of Ethereum they wish to buy and their desired price range. After receiving several quotes, the hedge fund manager evaluates the offers and negotiates with the sellers to finalize the transaction at the best possible price. RFQs allow institutional investors to execute large cryptocurrency trades with minimal market impact and at competitive prices.