- Peer-to-peer trading (P2P) is an alternative way of buying and selling cryptocurrencies without a broker or other third parties.
- Most commonly used to exchange fiat for crypto and vice versa, P2P trading offers immediate advantages such as zero fees and speedy settlement (15 minutes) as compared to using credit cards.
- Safety and security is foremost when it comes to P2P crypto exchanges; traders should always trade using established exchanges such as Phemex, and to be vigilant against scams such as duplicate orders, transfer errors and fake receipt fraud (read more below.)
What Is Peer-to-Peer (P2P) Trading?
Peer-to-peer (P2P) trading is the trading of cryptocurrencies directly between buyers and sellers without using a third party. P2P crypto exchanges give traders better control over the trade by allowing them to set the terms of their trade orders; this includes deciding the rates of the transaction as well as the payment method, and who to trade with.
Under what situations do people choose the P2P trading method when buying crypto?
- When you want to trade your local fiat currency for cryptocurrency, for example, spend EUR to obtain BTC or USDT (do note that this is only available for selected currencies at the moment).
- When you want to trade your cryptocurrency for fiat currency, for example, trade in BTC or USDT in exchange for EUR (similarly, this applies to selected fiat currencies at the moment).
In other words, the P2P method is most commonly used as an on- and off-ramp channel between those who want to exchange cash for crypto, and crypto for cash; it connects the world of traditional currencies with the world of cryptocurrencies.
On-ramps enable users to exchange their fiat money for cryptocurrencies; off-ramps enable users to cash out their earnings from crypto by enabling them to sell off the crypto for fiat money.
Benefits of P2P Crypto Exchanges
1) Zero trading fees:
Minimizing trading fees is one of the main reasons people use P2P exchanges in the first place. When you cut out the middleman, you also cut out the extra fees that come with it.
For example, if you use your credit card to buy or sell USDT for fiat, you will need to incur fees of approximately 2%.
To start buying crypto with zero fees on Phemex takes only 3 steps:
- Register for a Phemex trading account
- Complete KYC identity verification process
- Set up Google 2-factor authentication
Watch this short video for step-by-step instructions on how to use the Phemex P2P trading platform.
When you buy or sell crypto via Phemex’s P2P trading platform, your transaction can get settled in as little as 15 minutes.
In contrast (and this pertains especially to withdrawal of your funds), it can take at least an hour or sometimes even days, depending on the payment facility you choose. And if you want to speed it up, you will need to pay express charges.
3) Flexible payment methods:
Various payment methods can be used on P2Ps, including but not limited to: bank transfer, Paypal, debit/credit cards, and even cryptocurrencies.
You can also pay via e-wallets such as Wise, Revolut, Zen, Paysera, Faster Payments, Google Pay, Apple Pay, Wechat and Alipay.
How Do P2P Crypto Exchanges Work?
P2P crypto exchanges work like other online marketplaces, such as Facebook Marketplace or Craigslist–you can view advertisements placed by others to buy or sell crypto, and you can similarly place your own advertisement.
Here is a screenshot of a list of advertisements placed by USDT sellers, as an example.
What Is a Bitcoin Peer-to-Peer Marketplace?
A bitcoin peer-to-peer (P2P) marketplace is a platform where buyers and sellers specialize in the direct trading of bitcoins. P2P bitcoin exchanges allow users to trade bitcoins using currencies such as altcoins and fiat currencies. A bitcoin P2P exchange functions as a bridge between buyers and sellers with the main purpose of matching and connecting bitcoin buyers and sellers.
To sell or buy bitcoins P2P, parties can send in a market order or a limit order; after choosing a market order, the trader allows the market to buy bitcoins at the best market price. Then, traders can either ask the markets to choose a price that is either higher or lower than the limit order price; this depends on if the party involved intends to buy or sell.
Can You Sell Crypto for Cash on P2P Exchanges?
Yes. Most P2P crypto exchanges enable users to buy crypto with local fiat or sell crypto for local fiat. However, do note that different countries may have different purchasing options subject to each fiat partner.
Disadvantages of P2P Crypto Exchanges
While there are many advantages to using peer-to-peer exchanges, there are also some downsides that users need to be aware of. These disadvantages include:
- Limited selection: P2P crypto exchanges typically only offer a limited selection of cryptocurrencies based on what is listed on the platform by sellers. This lack of liquidity can make it challenging to find a buyer or seller for your trade.
- Possible issues with customer support: Since P2Ps are decentralized platforms in nature, there is no central authority to provide customer support. However, P2P platforms hosted by established exchanges like Phemex do not have this issue.
What are the common scams to be aware of on P2P crypto exchanges?
When trading on P2P crypto exchanges, it’s essential to be aware of the risks and take precautions to avoid being scammed. Common P2P scams include placing duplicate orders to confuse the system, transfer errors and fake receipt fraud.
To avoid being scammed, only trade with reputable users, do not send money or crypto to anyone before the trade is completed and do not trade outside of the P2P platform.
5 Best P2P Crypto Exchanges
Now that we’ve gone over some of the advantages and disadvantages of P2Ps let’s take a look at five of the best options:
Phemex’s P2P platform offers users the ability to trade cryptocurrencies such as Ethereum, Bitcoin and USDT. The Phemex P2P platform has a clean interface that is easy to use, even for beginners, and it can effectively match buyers and sellers based on preferred price, quantity, and payment method via an automatic matching of users. This removes the inconvenience of scrolling through volumes of user advertisements.
A critical feature of the Phemex P2P platform is that there is a support team to mediate disputes.
Paxful is a global exchange, and so it covers a wide range of jurisdictions except for a few restricted countries. Users can buy and sell Ethereum locally on the platform, as well as other cryptocurrencies such as Bitcoin. Before making any purchase on the platform, make sure that the seller has enough positive feedback and a verified ID.
LocalBitcoins is a popular Paxful competitor that offers a similar service. The platform is available in nearly every country, and it supports the sale of a wide range of cryptocurrencies. LocalBitcoins is convenient because it offers a variety of payment methods, including cash deposits, wire transfers, and even PayPal. The platform also has a built-in escrow service to protect buyers and sellers from fraud.
Hodl Hodl is a P2P that supports the buying and selling of a variety of cryptocurrencies. This is a non-KYC and non-custodial P2P platform. Hodl Hodl charges 0.3% in trading fees; however, it offers global trades and guarantees complete security and anonymity of users.
Bisq is a decentralized exchange that offers P2P services. The platform does not require KYC, and it supports the sale of a wide range of cryptocurrencies. Bisq is convenient because it offers a variety of payment methods, and it doesn’t require a rigorous registration process. The platform also has a built-in escrow service to protect buyers and sellers from fraud.