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Intro to Peer-to-Peer Trading: What is P2P Trading and How Does a Local Bitcoin Exchange Work?

2021-03-25

Main Takeaways

  • Binance P2P is an easy to use platform that allows you to buy and sell cryptocurrencies directly with other users.

  • While P2P gives more control over your trading, it’s essential to have a third party like Binance that facilitates transactions and safeguards users on the platform.

  • In this article, you will learn how P2P exchanges work along with the benefits and disadvantages of P2P trading.

What is Peer-to-Peer Trading?

Peer-to-peer (P2P) trading is the act of buying and selling cryptocurrencies directly between users, without a third party or intermediary. When you buy or sell cryptocurrencies using a traditional exchange, you don't get to transact directly with the counterparty. Instead, you use charts and other market aggregators to determine the optimal time to buy, sell, or hold cryptocurrencies. The exchange organizes the transaction on your behalf, and the market price determines your final price at the time of transaction.

P2P trading gives you more control over who buys your cryptocurrencies and who you buy from, the pricing and settlement time. While P2P trading gives users finer control over the process, it is vital to note that peer-to-peer transactions carry some risks when there is no third party to broker the deal. This is where an exchange like Binance P2P becomes essential for risk-conscious users.

What is a P2P Crypto exchange?

Peer-to-peer (P2P) crypto exchanges are platforms that allow crypto-market participants to trade with each other directly. This means transactions are done exclusively between the buyer and the seller, with minimal to zero involvement from any third-party intermediary. 

How Does a P2P Exchange Work?

Some people compare a P2P exchange to marketplaces like Craigslist or Facebook Marketplace, because P2P exchanges connect crypto buyers and sellers. Buyers and sellers can browse crypto ads or post ads of their own. P2P exchanges can also provide a layer of protection for everyone involved in the transaction, by implementing a feedback or rating system. Picture this: You meet someone on Twitter who is interested in buying Bitcoin—and you happen to have some Bitcoin to sell. Twitter is not a P2P platform, so it is difficult to establish trust. What happens when the buyer gets the Bitcoin but doesn't send the payment? What happens when the buyer sends a lower payment amount than expected? Fraud is the biggest risk of conducting P2P trades without an exchange.

Binance P2P can protect both buyers and sellers to safeguard transactions and reduce the risk of fraud. In addition to a public rating system, Binance P2P uses escrow to secure the cryptocurrencies until both parties have confirmed the transaction. For example, if you are selling Bitcoin for fiat money, Binance will escrow your Bitcoin. Once you send the Bitcoin and the transaction is confirmed, Binance will subsequently credit you and the buyer, ensuring a safe and secure transaction. If either party is unhappy with the transaction, they can file an appeal to resolve the issue between counterparties, or have Binance Customer Support step in. 

Advantages of P2P Exchanges

1. Global Marketplace

One advantage of using a local P2P Bitcoin exchange is that it gives you access to a global market of cryptocurrency buyers and sellers. Binance P2P is accessible in over 250 countries. You can buy and sell cryptocurrencies with people across the globe in a few seconds.  

2. Multiple Payment Methods

When you trade on traditional exchanges, you may not get as many payment options compared to P2P exchanges like Binance. Binance has over 700 payment methods available, including in-person cash payment—which can be useful for those who prefer face-to-face transactions or those without access to a bank account. 

3. Zero Trading Fees For Takers

While traditional cryptocurrency exchanges attract a fixed fee or percentage per trade, Binance P2P allows traders to connect and perform transactions with zero fees. Not all P2P exchanges offer this feature, so be sure to check the terms and conditions when choosing a peer-to-peer exchange. 

4. Secured Transactions Using Escrow

As stated above, Binance has an escrow service to protect buyers and sellers. When opting to secure a transaction with escrow, funds are held by Binance and only released when the terms of the deal are met by both parties involved. Binance P2P transactions must be completed within a certain timeframe: If either party cannot meet the terms of the deal, the cryptocurrencies or fiat will be returned to your wallet once the time limit is over. 

Disadvantages of P2P Exchanges

1. Slower Trading Speeds

While P2P transactions can be conducted near-instantly once both parties have confirmed the transaction, one party might delay the transaction for various reasons. With traditional trading, you don't need to wait for the buyer or seller to confirm before you can move on from the transaction. With P2P, the buyer or seller can change their minds halfway through the transaction and decide to end it.

2. Low Liquidity

P2P exchanges are still relatively new and have lower liquidity than centralized exchanges. For this reason, larger traders who need to complete major transactions may prefer to use OTC (over-the-counter) trades or buy/sell using the standard exchange.

How do I Protect Myself Against P2P Fraud?

The first step to protect yourself against fraud is to use a reliable P2P exchange like Binance. However, you still need to be careful when selling Bitcoin or other cryptocurrencies on Binance P2P. Learn how you can avoid common scams and trade safely. 

Can P2P Trading Be More Profitable?

Binance P2P users can browse crypto listings to buy Bitcoin at the lowest available price, or post an ad selling crypto at a desired price.

Making Money Trading Bitcoin by Offering Convenience

P2P exchanges have more flexible payment options than regular centralized exchanges. To take advantage of this, post buyer-friendly ads and take more flexible payment options for your cryptocurrencies. The more fluid you are about the payment methods you accept, the quicker you will likely make a sale.

Do You Need to Understand Technical Analysis to Profit?

While traditional exchanges feature advanced charting interfaces and complicated order books, peer-to-peer exchanges are relatively simple. Users only need to understand basic concepts like profit, loss and demand and supply. For example, if you buy one Bitcoin for $40,000 and you sell it for $40,500 on a P2P exchange, your profit would be $500. Easy, right? 

Can You Make Money from Bitcoin in a Bear Market?

Advanced P2P Bitcoin traders know they can make money from Bitcoin in a bear market as much as a bull market. Traders earn their money by selling Bitcoin on P2P exchanges at a higher price than they buy it. You can also decide to buy, hold, and sell once the bull market returns.

Can You Make Passive Income From Bitcoin Trading?

In short: Yes, you can. One of the best ways to make passive income is to use products the Binance Savings and wait for it to generate interest. Binance Savings offers flexible and locked savings for Bitcoin and other cryptocurrencies with attractive interest rates.

Tips for Getting the Most Trades on Binance P2P

Many people on P2P platforms want to sell their crypto assets quickly. Below are a few tips to help you complete more trades using Binance P2P.

  • Stay up to date on market rates for crypto and set realistic prices

  • Don't make a habit of canceling transactions before completion

  • Regularly monitor your ads and check newly posted ads 

  • Accept more payment methods to entice buyers

  • Communicate promptly and clearly with counterparties 

  • Exchange feedback to build your own rating

These are the fundamental aspects of P2P trading on Binance. Traders from around the world have been using Binance P2P to make money trading popular cryptocurrencies like BNB, Bitcoin (BTC), Ethereum (ETH) as well as stablecoins like BUSD, and more.

For more information about Binance P2P, read the following articles:

Disclaimer: Your use of Binance P2P services and all information and other content (including that of third parties) included in or accessible from Binance P2P services is at your sole risk. Our only responsibility is to handle crypto transactions. All payments are final upon completion unless otherwise required by law. The Binance P2P platform has neither the right nor obligation to resolve any disputes arising from a completed payment. Neither the Binance P2P platform nor merchants shall be responsible for your loss in a completed payment.