A P2P Bitcoin exchange does not touch the user’s money. These platforms simply connect cryptocurrency buyers and sellers with some basic tools. When a buyer places a buy order, the platform’s matching engine matches it with a sell order. The transaction takes place only when the user confirms the transaction.
But how to buy Bitcoin safely on P2P exchanges demands some work from you. By reading this article, you will become much more informed about the most important things to consider.
The fact is that not all the P2P exchanges are equally secure, private, or intuitive. In addition to the fraudulent activity by the platforms, users themselves add to the risk of P2P exchanges. Just as an example, many P2P exchange users face bank account seizures. That’s because they received fiat from a hacked bank account. Likewise, a seller can trick a buyer by not releasing Bitcoin even when the payment for the cryptocurrency has been received.
How to Buy Bitcoin Safely on P2P Bitcoin Exchanges – 10 Things to Consider
Keep an eye on seller/buyer reputation
A P2P Bitcoin exchange is a decentralized entity. As there is no central authority to overlook the transactions, the users remain vulnerable to fraud. To prevent frauds to a certain extent, the P2P exchanges have deployed a reputation management system that ensures safer trades. Below are some examples.
LocalBitcoins P2P cryptocurrency exchange
The leading P2P Bitcoin exchange LocalBitcoins allows you to take a look at the trader’s reputation before you seal the deal. While it lets you know the age of the trader on the platform, it also grants you access to the feedback for his previous trades. This is one of the reasons why LocalBitcoins is considered by many to be the best place to buy Bitcoin.
Paxful P2P cryptocurrency exchange
Paxful, a rapidly growing P2P exchange creates a very simple way to rate the traders. A thumbs-up indicates happy trades and a thumbs down hints something is fishy. If you click on the user’s profile, you can check the feedback of his previous trades.
LocalCoinSwap P2P cryptocurrency exchange
LocalCoinSwap takes principles from Paxful for reputation management but takes it to another level. As can be seen in the screenshot, it uses thumbs up/ thumbs down as reputation indicators. But there are three more icons:
Shield- The user has a verified phone and email
Trophy- The user is a professional trader on the platform
Lightning bolt- The average response time of the trade with the user is under 1 hour
Where is the buyer/seller located?
P2P cryptocurrency exchange is considered to be the best way to purchase Bitcoin nowadays. However, you must check the buyer/seller location as it matters in some cases. To state an example, when a user needs a quick buy/sell, he might want to select payment methods that are more secure and quick for his jurisdiction. This matters because international payments might take longer and might cost more. If you’re looking for options for how to buy Bitcoin safely, be sure not to overlook the location.
The platform offers traders a quick buy/sell option. With this, the users can choose the country of trade and get matching options based on that filter.
Along similar lines, LocalCoinSwap advertisements display the country of the trader. In case an advertisement does not display it, you can enter the offer to view his location.
What are the trade limits when you purchase Bitcoin?
Every P2P Bitcoin exchange requires you to set minimum and maximum transaction limits. This is due to some jurisdiction regulations and to make sure you have the liberty to sell/buy Bitcoin at prices of your choice.
Let’s imagine that you want to buy $1,750 worth of Bitcoin. The platform shows you a list of potential sellers that are offering Bitcoin at the price you desire. Once you try to place the trade, you realize the seller has put $200 as the maximum trade limit. That would be a disappointment. To make sure users don’t end up wasting time, platforms are now displaying the trade limit on the advertisement itself. Below is an example of how Paxful displays trade limits.
Look at the screenshot of the Paxful user dashboard below. On the right side of seller details just next to the “Buy” button the exchange displays the “Buying Limit”. This ensures the buyer is able to pick the right seller as per his requirements.
Does it offer the payment methods that suit you?
In addition to asking yourself how to buy Bitcoin safely, you will want to ask yourself if your chosen P2P Bitcoin exchange offers a suitable payment method. That is because many reputed exchanges offer limited payment methods. Therefore, before you decide to trade on a particular P2P exchange make sure it has the right payment option for you.
Nowadays P2P exchanges offer a plethora of payment options. Everything from traditional bank transfers to gift cards. Below are a number of examples of P2P Bitcoin exchanges along with their payment methods.
The exchange offers 354 payment methods that include 9 different ways to execute bank transfers.
The exchange offers 250 payment methods for trade settlements.
Read the Advertisement carefully
An advertisement posted on a P2P exchange needs to be read thoroughly before you conclude the deal. Every exchange has a set of parameters that a buyer or seller needs to key in before the ad goes public.
Look at the LocalBitcoins transaction below:
Here the seller Traderman wishes to sell Bitcoin and he has mentioned the payment methods and the terms of trade. He specially mentions that this ad is for cash deposit only. Make sure you have understood the terms before you conclude a transaction.
What is the under spot price?
A P2P exchange might be one of the best ways to purchase Bitcoin if you understand how to find the best price. That is because there are often sellers selling their Bitcoin at a price lower than the spot rate of many centralized Bitcoin exchanges. You might end up receiving 1-15% below the market price of Bitcoin.
For payments by bank transfers
|Platform||Under spot %|
Does the KYC threaten your privacy?
The Wild West-like unregulated days for crypto traders are almost over. Most of the P2P exchanges need you to apply for Know Your Customer (KYC) before you can start trading. If you are concerned about privacy and anonymity, make sure you pick a P2P exchange that does not ask for KYC.
As an example, LocalBitcoins started asking users to submit KYC details in mid-2018. But there are few exchanges like HoldHold, Bitzlato, and LocalCoinSwap that still do not require KYC details for trading.
Then there is another league of P2P exchanges like Giottus where the KYC process is quick and does not hamper a trader’s experience. And then there is WazirX where traders need to submit their full KYC details within 15 days of joining the pre-sign up phase. There are certain rewards offered by WazirX that can be collected by the user only when they submit their KYC within 15 days.
How high are the rates and fees?
Every exchange has different rates and fees for every transaction you perform. Some P2P exchanges might prove to be profitable for a seller and others might be more profitable for buyers. If you’re asking yourself how to buy Bitcoin safely, you want to be aware of the fees and rates you are paying for each trade.
For example, on P2P exchange Localethereum, the maker fee is 0.25% and the taker fee is 0.75%. Meanwhile, the Russian P2P exchange Bitzlato is charging trading fees between 0% and 5%.
Be aware of chargebacks
Many exchanges like LocalBitcoins and Paxful help you buy BTC through PayPal. Actually, there is no direct way of buying BTC with your PayPal account. But these exchanges play a role and help you get through by linking your PayPal account to your exchange account.
However, if the buyer is paying you using Paypal, there is a chance that the incoming transaction might get rejected with a chargeback. A chargeback occurs when the buyer asks his credit card company to reverse the transaction that has already been cleared. But by this time your BTC would have already moved from the escrow account to the buyer account.
Can you lock in the price?
This might seem like a very insignificant feature but could save you from the losses triggered by events like ‘flash crashes’. Let us assume you are in the middle of a deal and the price was not locked-in, you could lose hundreds of dollars in a single transaction. This feature will ensure that you receive the price agreed upon at the time the transaction was made.
If you’re asking yourself how to buy Bitcoin safely, you’re already on the right track. Most people rush to purchase Bitcoin any way they can. If you follow the tips and advice from the 10 points above, you should be well on your way to trading Bitcoin safely on P2P exchanges.
The most important point is to pick a credible peer-to-peer exchange and then checkout the buyer/seller reputation. As explained above checking the trade limits, payment methods, under spot price and the lock-in price are equally important.
Aside from the ones mentioned above, we found a noteworthy feature by P2P exchange WazirX that protects platform users from getting into trouble with banks.
Payment Remarks – WazirX
In Q3 of 2019, WazirX introduced the Payment Remarks option where the user can enter an encoded remark in the banking app(414F).
In the past, we have seen P2P users getting into trouble for mentioning crypto-related keywords in the remark section. WazirX has solved the issue forever as it now allows users to punch in an encoded remark that the banks cannot decipher.
For those who are not satisfied with centralized Bitcoin exchanges like Binance, Kraken, Coinbase, and Houbi, there are many decentralized alternatives available.
P2P exchanges are trying their best to make sure you trade Bitcoin safely. But it’s high time that you step up and shoulder the responsibility by protecting your assets while trading Bitcoin P2P.
The information discussed by Altcoin Buzz is not financial advice. This is for educational and informational purposes only. Any information or strategies are thoughts and opinions relevant to accepted levels of risk tolerance of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided.
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