Résumé
Peer-to-peer (P2P) trading consists of the buying and selling of cryptocurrencies directly between users without intermediaries. P2P exchanges connect buyers and sellers and offer a level of protection through escrow services, rating systems and dispute resolution.
The benefits of P2P trading include global accessibility, multiple payment options, zero transaction fees, and personalized offers. However, it also has disadvantages, such as slower trading speeds and lower liquidity than centralized exchanges (CEX).
Introduction
P2P cryptocurrency trading is a method of buying and selling cryptocurrencies directly between users, without going through a central intermediary. Users can use a P2P exchange to access a global marketplace, multiple payment options and personalized offers. However, P2P trading also has disadvantages, such as slower trading speeds and lower liquidity. In this article, we will look at the pros and cons of P2P trading and how people can benefit from it.
What is P2P trading?
P2P crypto trading refers to the direct purchase and sale of cryptocurrencies between users, without third parties or intermediaries. This is the opposite of buying or selling cryptocurrencies on a CEX, where you cannot trade directly with counterparties.
A CEX uses charts and market order aggregators to evaluate current market prices and determine the optimal time to buy, sell or hold your cryptocurrencies. When you are ready to buy or sell, the exchange enters your order into its order book and facilitates the transaction on your behalf.
Depending on the type of order you use, effects such as slippage may mean you don't get the exact price you want. P2P exchanges, on the other hand, give you complete control over the price, settlement time, and who you choose to sell or buy from.
How does a P2P exchange work?
Think of a P2P exchange in the same way as the Facebook marketplace. They are similar in the way they connect buyers and sellers. However, buying or selling a product on the Facebook marketplace can be tricky because the counterparties are strangers and it is difficult to establish a relationship of trust.
What happens if the seller receives payment, then blocks the buyer and doesn't send them the product they purchased? In this case, the scammed buyer loses money.
P2P exchanges aim not only to connect buyers and sellers, but also to provide them with a layer of protection by securing transactions and reducing the risk of fraud. Buyers and sellers can view sale or purchase listings and post their own listings while benefiting from this protection, made possible by rating systems.
Additionally, the P2P exchange offers an escrow feature to secure purchased and sold cryptocurrencies until both parties have confirmed the transaction. For example, if you sell Bitcoin for fiat currency, Binance will put your Bitcoin (BTC) in escrow. Once you receive the money in fiat, you can confirm the transaction and the BTC will be released to the buyer's wallet.
If either party is unhappy with the transaction, they can file an appeal to resolve the issue with the counterparty, or ask Binance customer service to intervene. It should be noted, however, that the appeal must be filed before the transaction is closed.
The advantages of P2P trading
A global marketplace
One of the benefits of using a local P2P Bitcoin exchange is that it gives you access to a global marketplace of cryptocurrency buyers and sellers. For example, some P2P exchanges are accessible in hundreds of countries, allowing you to buy and sell cryptocurrencies with people around the world in minutes.
Multiple payment methods
Traditional exchanges may not offer as many payment options as P2P exchanges. Binance P2P, for example, offers over 700 payment methods, including in-person cash payments. This can be useful for those who prefer face-to-face transactions or those who do not have access to a bank account.
No trading fees for takers
While some cryptocurrency exchanges charge a flat fee or percentage per trade, others allow traders to connect and transact for free. Be sure to check the terms and conditions before choosing your P2P exchange.
Transactions secured by an escrow solution
As noted above, some cryptocurrency exchanges use escrow services to protect both buyers and sellers. When you choose to secure a transaction through escrow, the funds are held by the exchange and are only released when the terms of the transaction are met by both parties.
Transactions must be completed within a certain time frame. If a buyer does not make payment in fiat currency within the stipulated time, their order is canceled and the cryptocurrency is returned to the seller's wallet.
Personalized offers
Sellers have complete control over the selling price, exchange rate, payment method, and the amount they are willing to sell per transaction. The same goes for buyers (purchase price, payment method and how much they are willing to spend per transaction). As long as the terms of both parties agree, a deal can be reached.
Disadvantages of P2P trading
Slower trading speeds
Although a P2P transaction can be completed almost instantly once both parties confirm it, one party may delay the transaction for various reasons. With traditional trading, you don't have to wait for the buyer or seller to confirm the transaction.
Low liquidity
P2P exchanges naturally have lower liquidity than CEXs due to the nature of the process. This is why large traders who need to make large transactions may prefer over-the-counter (OTC) trades, or buying/selling through a standard exchange.
What are the advantages of P2P trading?
P2P trading is a convenient way to invest in cryptocurrencies. It not only allows you to buy or sell cryptocurrencies directly to other people, but also avoids some of the transaction fees associated with traditional exchanges. Here are three ways to use P2P exchanges to take advantage of their benefits:
Fiat arbitrage
P2P trading offers arbitrage opportunities with fiat currencies. With over 100 fiat currencies to choose from on Binance, for example, you have the opportunity to take advantage of the price differences between these fiat currencies.
Arbitrageurs start by calculating price differences and potential gains before making a purchase. Here is an example of how an arbitrageur can take advantage of price differences.
Trading BTC/USD If the buy price is $21,000 or €23,100 (USD and EUR markets have different prices) and the sell price is $20,800 or €22,880, buy bitcoins and sell them immediately into USD would result in a loss of $200 or €220 (sell price - buy price).
Trading BTC/EUR: If the buy price is $21,364 or €23,500 and the sell price is $21,182 or €23,300, buying Bitcoin in USD and selling in EUR would lead to profit of $182 or €200.
The example above shows that buying BTC in the US market and selling in Euros can be more beneficial than buying and selling only in the domestic market.
Arbitrage between different exchanges
P2P trading offers many arbitrage opportunities, as there are often significant price differences between exchanges. Many people use P2P trading to buy and sell cryptoassets to benefit from these differences.
They can arbitrage between different exchanges, usually by buying and selling the same asset to take advantage of the price difference between different exchanges.
For example, if Bitcoin sells for $21,000 on exchange A and $21,100 on exchange B, the buyer who buys it on exchange A and immediately sells it on exchange B earns $100 dollars per Bitcoin.
Publication of purchase and sale announcements
This method allows you to post an ad on a P2P trading platform, indicating the asset you want to buy or sell and the price at which you are willing to make the transaction. Once your ad is published, other users of the platform who see it decide whether they want to trade with you.
If another P2P user decides to trade with you, he or she will send you a trade request. Once the request is accepted, both parties can complete the trade. By choosing to set a price higher than the market price, you ensure that you generate more revenue.
For example, you can post an ad to buy Bitcoin at $20,000 and another to sell them at $20,200. So, you can earn $200 for every Bitcoin you trade.
What are the risks of arbitration?
While arbitration can be beneficial, it comes with its own risks and costs. For example, changes in exchange rates can cause the value of a currency or asset to fall. In this case, the trader may suffer a financial loss if the value of his asset decreases before he manages to sell it on another market.
Additionally, moving assets between markets incurs banking fees which can impact profits. There may also be other indirect costs, such as the cost of financing transactions and the opportunity cost of not investing the funds elsewhere.
Is P2P trading safe?
P2P trading is generally safe, but it also depends on the exchange and the security measures in place. While older P2P exchanges had a higher risk of theft and scams, many newer P2P platforms have significantly improved their security measures.
Today, a leading P2P exchange has an escrow service, regular security updates, and a rigorous identity verification process (among other measures) to keep users safe and secure. users. However, even if strong safeguards are in place, all trading carries risks, and P2P trading is no exception.
Conclusion
P2P crypto trading is a way to buy and sell cryptocurrencies without going through intermediaries. With P2P trading, you control the prices, counterparties and timing of your transactions. This can be compared to Facebook's marketplace, but with an added layer of security through review systems and escrow services.
This global marketplace provides access to a variety of payment options, including in-person cash transactions. Although P2P transactions can be slower and less liquid than CEX, those who are willing to wait and want to customize their trades can benefit from arbitrage and other opportunities offered by P2P trading.
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Disclaimer and Risk Warning: This content is presented to you “as is” for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial advice, nor as a means of recommending the purchase of a specific product or service. Prices of digital assets can be volatile. The value of your investment may go down as well as up and you may not get back the amount you invested. You are solely responsible for your investment decisions and Binance Academy is not responsible for any losses you may incur. This does not constitute financial advice.