Peer-to-peer trading is a strange phenomenon in some ways, as access to cryptocurrency has grown, so has P2P trading. It’s an odd thing that may not make a lot of sense at first, but when you consider that perhaps those engaging in this form of trading are doing a little more than just, well, trading it gets a bit more intriguing.
While cryptocurrency has changed in a lot of ways since the inception of bitcoin, the demand for P2P trading has only increased, and I’d like to explore that interesting dynamic a little with you.
My Love-Hate Relationship with Banks
While I considered titling this portion “why banks suck and I hate them”, I realised that I don’t, at least not entirely. I can’t argue with the convenience afforded by layering modern payment methods on top of traditional banking. This combination allows me to buy absurd things on eBay I probably don’t need, but buy anyway because I can blast through the checkout with the help of PayPal attached to my bank account like a tick.
Convenience matters, and that’s part of the problem with banks.
Ever had a transaction bounce back and the bank flag it saying essentially “yeah sorry buddy we’re not going to do that and if you keep trying we’ll probably close your account”, not in the least bit convenient. Furthermore, speaking with a bank about their arbitrary decisions to do or not do something is often fruitless and something anyone that has been involved in cryptocurrency for a while has likely dealt with at one point or another.
If you are yet to experience the joy of these encounters, just imagine being a kid again and asking your over-tired parent “why” only to hear back “because I said so”.
As someone that works not just in cryptocurrency but at a P2P exchange (my recommendation: LocalCoinSwap), I’ve not only experienced this kind of thing myself but regularly hear stories of this happening to those in the crypto community around me.
The Current State of P2P Trading
P2P trading has encountered some significant shakeups recently with the ban on cash trades from one of the largest P2P exchanges, and with some exchanges moving to place seemingly ever-increasing restrictions on traders, it hasn’t been easy for those established on these platforms. However, P2P trading is still booming and doesn’t show any signs of slowing down.
There’s a strong userbase not just in countries that lack access to banking or have regulatory restrictions on cryptocurrency, but also countries that have plenty of options for trading crypto. The United States, Australia, and many other countries that have domestic exchanges with significant trading volume still have a very active userbase on P2P exchanges.
While all this makes sense and follows the growth of crypto in recent years, it’s also a little peculiar. With so many ways to get in or out of cryptocurrency these days and exchanges with high leverage trading or absurd amounts of trading pairs, why would people still use P2P exchanges?
While trading P2P has gotten a little more difficult in some ways, or at least on some platforms, its value proposition hasn’t actually changed.
When Trading Crosses Boundaries
Trading P2P doesn’t just cross borders; it crosses boundaries. Typically when you think of trading, you likely don’t consider the counterparty in the trade, but perhaps it’s time to look a little harder. When you enter a P2P trade, either as a casual trader or as something you do to earn a living, you are providing a service.
You may be providing convenience, allowing someone to buy bitcoin with PayPal or sell unwanted gift cards for ethereum. Even if you are exploiting a bitcoin price premium in a specific region, you are helping indirectly to provide liquidity in that area that helps provide more equilibrium between supply and demand.
In some way, what you are essentially doing is not just trading, but providing a service. Whatever the benefit, be it access or convenience there’s something more here you just won’t find on your typical order book exchange, and perhaps that matters in itself.
The ability of P2P exchanges to create a link between traders anywhere in the world has arguably not just helped cryptocurrency grow but helped to foster the more stable market we now enjoy. While bitcoin and other cryptocurrencies can still be extremely volatile, the regional arbitrage opportunities only seem to be reducing.
With crypto able to cross the planet with minimal friction, the flow of cryptocurrency is more responsive, and this has helped fill a hole the broader community would otherwise likely be struggling with significantly more than we do.
Reducing Regulatory Slippage
As various regions ebb and flow in regards to their moods on cryptocurrency, this can not just affect the market, but the lives of people all over the world. Having access to cryptocurrency provides the ability for those that need it to help escape hyperinflation or even allow for capital flight from a dangerous situation in an unstable region.
If people are restricted to trading on platforms that only allow for heavily monitored and controlled payment methods like wire/bank transfer than a lot of this safety net is gone.
Trading P2P keeps trading flexible, it allows you to work with what you have and this is an indispensable part of what makes it great. The service provided by everyone that gets involved with P2P trading helps provide a safety net for those that need it while offering convenience to themselves to be able to trade their own way.
The thing I consider more important about having this freedom when trading is it keeps things more reasonable. When things are easily restricted, regulatory overreach can begin to clamp down, leaving many who either need or want access to cryptocurrency left out in the cold.
Were it not for the existence of cash we’d likely be experiencing a far different reality when it comes to finances in the modern world (the reason I have a significant distaste for cash restrictions), and I believe this to be the same for cryptocurrency.
Cryptocurrency has the potential to be a driving force of innovation in the years to come, and my belief is that this long-standing method of trading it will help us on that path forward unencumbered.
While P2P trading will evolve with time and the needs of traders shifts a little here and there, the service provided not just between P2P traders themselves, but to the broader cryptocurrency space shouldn’t be ignored.
Maybe the next time you are thinking about throwing a little more cash into crypto or selling off some gains, you could consider how you are trading a little differently.