P2P Trading Guide
P2P trading platforms allow users to trade cryptos on exchanges like Binance without the need for complicated charts or centralized solutions. In the US, Nigeria, Pakistan, India, the Philippines and all around the world, thousands of traders exchange cryptocurrencies online directly between each other. This tutorial will investigate what P2P trading is, how it works, how to compare different P2P accounts and more.
#1 - BitMEX
BitMEX offer the largest market liquidity of any cryptocurrency exchange. The platform also offers low trading costs and minimum deposit requirements.
- Instruments: Crypto
- Regulator: Republic of Seychelles
- Platforms: AlgoTrader, TradingView
- Min. Deposit: $0.01
- Min. Trade: Varies upon the crypto traded and amount of leverage
BitMEX offer the largest liquidity crypto trading environment anywhere. Contracts from $1. Compliant with global AML guidance, the platform offers cutting-edge crypto exchange and hedging.
#2 - Kucoin
Kucoin is a global crypto exchange offering spot and margin trading alongside lending services and trading bots.
- Instruments: Crypto, Futures
- Platforms: Own
- Min. Deposit: $0
- Min. Trade: 0.0001
Kucoin offers access to a long list of leading and emerging tokens with low fees.
#3 - Bybit
Bybit is an established crypto exchange aimed at active online traders. Clients can speculate on leading tokens like Bitcoin, access crypto staking and loans, or trade NFTs using the firm's digital marketplace.
- Instruments: Cryptos, Futures
- Platforms: MT4, TradingView
- Min. Deposit: $0
- Min. Trade: 0.001
Bybit offers an extensive selection of crypto derivatives and spot trading products.
- Low minimum deposit
- Demo account
- Copy trading
- No regulation
- Few payment methods offered
P2P Trading Explained
Peer-to-peer trading is the act of buying and selling cryptocurrencies directly between users, without using a third-party intermediary. Consumers can purchase or sell any crypto they want, from high-priced Bitcoin (BTC) to the comparatively low-priced Tether (USDT).
With traditional exchanges, the market price determines the final price at the time of transaction. P2P trading gives users more control over who they conduct transactions with, the pricing and the settlement time.
With that said, P2P trading does carry risks when there is no third party to broker the deal, so users may want to consider P2P exchanges. There are a wide variety of apps available, including Binance and Binance Lite, Kraken, Coinbase, OKEx and Kucoin, where trading jobs can be conducted safely and securely. Even sites like Venmo facilitate P2P cryptocurrency trading for their users with low fees.
P2P trading is also expanding into other markets, now involved with invoice and energy trading. Power companies throughout the world, including the UK and Malaysia, allow consumers to buy and sell excess energy (usually generated from solar panels) back to the grid or other households. As renewable energies grow in prominence, the market size for this is expanding rapidly and new blockchain solutions and regulatory frameworks are currently being developed and implemented to support it. Gamers may also experience P2P trading through titles like CSGO and it is even possible to trade forex this way.
How Does P2P Trading Work?
P2P trading exchanges like Binance are similar to marketplaces on websites like eBay and Facebook Marketplace in that they connect crypto buyers and sellers. These buyers and sellers can browse or post crypto ads.
The exchanges provide a layer of protection to both sides of the transaction. For example, if you met someone from West Suffolk on Twitter who was looking to buy Bitcoin and you had some to sell, you would likely find another platform to conduct the trade as Twitter does not protect its users. Setting up the exchange on a P2P platform would be much safer and stop the buyer from receiving the Bitcoin without sending payment.
P2P trading platforms often add a public rating system to help protect both buyers and sellers by allowing them to see other users’ histories. Moreover, additional methods like Binance’s Escrow implementation provides further protection, as the cryptocurrencies are secured until both parties have confirmed the transaction.
If you are selling Bitcoin for fiat money, Binance will Escrow your Bitcoin until both you and the buyer have confirmed that the fiat transaction has happened.
P2P Vs Regular Exchanges
Regular exchanges use an order book to match buy and sell orders between clients, at prices set by the market. In these exchanges, neither the buyer nor the seller has the slightest clue who the other party is. If users are looking for anonymity and privacy, this is the way to go.
However, if you want to trade with a specific person or would just like to know more about the other party before conducting a deal, P2P trading is a good option.
P2P trading shares a set amount of data to both parties of the transaction. This information can be anything from their wallet address to their forum username. These exchanges can also facilitate face-to-face meetings if the parties prefer that. P2P trading is also generally cheaper than regular exchanges, with much lower transaction fees.
Pros Of P2P Trading
- Seller protection
- Global marketplace
- Secure transactions
- Low to zero trading fees
- Range of payment methods
- You know who you are trading with and their history
Cons Of P2P Trading
- Low liquidity
- Reduced privacy
- Slower trading speeds
How To Compare P2P Accounts
When deciding which P2P exchange to open an account with, there are a few things you should look out for:
- Fees: While some P2P platforms offer fee-free trading, others may charge crypto transaction fees. It is important to check the latest pricing strategies and charges to best decide which exchange to use. For example, Binance released an update from 1 July 2021, where users will be charged a small transaction fee (0-0.35%) on any transactions from ads they post themselves.
- History: Check that the exchange you wish to use allows you to see other parties’ trading histories so that you know you can trust them.
- Halts: Some websites suspend trading on certain coins for several reasons. This is natural and to be expected but try to pick a site that does not use trading halts too often and allows you to transport and transfer your coins almost anytime.
- Limits: Look at the limits that the P2P exchange sets on trading and ensure this works for you. Limits could relate to a minimum or maximum amount per transaction or to the number of transactions you can complete in a day.
Final Word On P2P Trading
P2P trading allows users to trade cryptocurrencies directly between users, without the need for a third party. Users have the freedom to set prices and settlement times, as well as know who they are trading with. With a global marketplace, lower trading fees and a variety of safe platforms, P2P trading is an effective way to start investing in cryptocurrencies today, on your terms.
Is P2P Crypto Trading Legal?
Yes, P2P trading is legal in the UK, Europe and many other countries. It is currently regulated by top agencies like the FCA, which ensures both sides are protected and that the risk of being scammed is lower. P2P trading is also generally considered halal, following Sharia law, meaning Islamic cryptocurrency traders can benefit from peer-to-peer trading services.
Is P2P Trading Profitable?
As with all trading, there is a risk attached and thus no guarantee that it will be profitable. However, high market volatility, liquidity and added control over price settings mean that, if executed effectively, P2P trading could be a potentially profitable enterprise.
Is P2P Trading Taxable?
If you make enough profit through P2P trading, you may be required to pay tax. The level of tax depends on the local government limits and any other sources of income you might have. Speak to a local tax advisor for professional guidance.
Is P2P Trading Safe?
When conducted on exchanges such as Binance, P2P trading is less likely to lead to you being scammed. If you trade outside of trusted P2P exchanges, there is a risk your funds will not be released and that you could be hacked.
How Do I Start P2P Trading?
Getting started with P2P trading is a straightforward process, requiring you to simply open an account with a trusted P2P trading platform. You can then deposit funds, either via a fiat channel, credit card or e-wallet, and begin trading with other users.
Where Can I Learn More About P2P Trading?
Our guide to P2P Trading and Platforms is a great start, but for further tutorials on using P2P exchanges or for the latest news, you can visit websites such as Reddit and YouTube. Users post all sorts of helpful information that can help you get started. Binance also have a guide titled “How does Binance P2P trading work?” that explains how it works on their platform.