How to Make the Most Money When Trading Bitcoin Peer-to-Peer?

Guest article by Harsh Agrawal of CoinSutra

See also: ¿Cómo ganar la mayor cantidad de dinero posible cuando se comercia con Bitcoin entre pares?

Cryptocurrency traders looking to trade bitcoin can either choose a centralized exchange or opt for a peer-to-peer exchange. Regular exchanges will have an order book to manage the matching, buying, and selling of bitcoin orders that offer little scope to grow beyond the market price of the exchange. These exchanges provide a certain degree of privacy while trading, making buyers and sellers anonymous to leverage the market volatility to the fullest.

The initial purpose of Bitcoin, on the other hand, was to allow peer-to-peer transactions. Bitcoin’s peer-to-peer version implies a one-on-one connection instead of other popular peer-to-peer technologies like torrent applications.

Peer-to-peer exchange models enable buyers and sellers to interact directly with one another without relying on any intermediary. These two entities can conduct transactions or hold money instead of an order book to match the buy and sell orders and manage the platform’s assets.

What Is Peer-to-Peer Trading?

Peer-to-peer, also known as P2P trading, is a growing trend among cryptocurrency investors as it offers a safer way to make more money passively by monitoring the market constantly.

P2P trading leverages the autonomous nature of cryptocurrencies, offering you the possibility to exchange bitcoin with other users on the platform. Not all peer-to-peer exchanges are alike: some may only provide a software for traders to buy and sell bitcoin in a non-custodial way. Others are more centralized, providing an escrow service to facilitate crypto transactions between users, often also offering a custodial Bitcoin wallet solution.

One of these bitcoin peer-to-peer exchanges is LocalBitcoins, a company founded already in 2012, that gives its customers an opportunity to buy, sell and trade bitcoin using a variety of different payment methods.

Being a regulated cryptocurrency service provider, LocalBitcoins also requires its customers to submit the proof of identification to create advertisements and receive bitcoin payments. LocalBitcoins also uses a reputation system to monitor personal and other users’ trading history. This will significantly improve the chances of successfully executing a transaction and creating a safe marketplace for its participants.

Depending on a preferred trading style, peer-to-peer trading could be a better fit for certain traders than a traditional exchange. Many proactive P2P traders would leverage derivatives trading exchanges like Bybit to speculate buying price of bitcoin in a future date. Read the Bybit review to check out its features before starting the P2P journey with a derivative exchange.

Another reason to prefer P2P bitcoin trading is that it offers a range of payment, withdrawal, and a faster trading option.

Start Earning More With P2P Bitcoin Trading

Once you decide to move ahead with P2P trading, sign up with LocalBitcoins to safeguard your digital assets. The best part of using it is that no fees are imposed on transactions between LocalBitcoins wallet users and only advertisers are charged a trading fee.

Now, here are the top tips to make more money with P2P bitcoin trading:

Use Arbitrage

Arbitrage is when you buy bitcoin from one marketplace at a lower price and sell it at a higher price on another marketplace. It is the most popular method of profiting amongst bitcoin traders regarding peer-to-peer bitcoin trading.

These are the two ways to use arbitrage and make more money with bitcoin trading:

a. Trading across multiple exchanges

This method involves purchasing bitcoin at a bargain price on one peer-to-peer exchange and then selling it to another exchange at a higher rate. You can leverage the volatility, liquidity, and payment differentials between exchanges and regional pricing differences.

These arbitrage possibilities provide modest margins (after costs are included) and are quickly snapped up.

b. Trading across multiple cryptocurrencies

The second approach is to generate arbitrage profits by trading several crypto coins having wide gaps between them.

If the gap between the Ethereum (ETH) and Bitcoin (BTC) on a multiple-coin P2P exchange is wide, you may purchase one ETH token and swap it for a BTC token to sell BTC and profit from the arbitrage.

For example, you may have $45,000 worth of ETH on Binance and a single BTC on Coinbase. Now, if bitcoin is worth $45,200 on Coinbase but only $45,000 on Binance, you might use an ETH ($45000) to purchase BTC on Binance P2P and sell it on Coinbase at $45,200. A bitcoin wouldn’t change hands, but you would still make $200 thanks to the difference in exchange rates across multiple coins.

Such trading is possible due to cryptocurrency’s market volatility. Again, remember that these trades are tight on margins, and exchange fees may eat up a large portion of your expected profit.

Become an Established Seller on Multiple Marketplaces

Another way to make more through P2P bitcoin is to establish your crypto-marketplace on multiple P2P exchanges. Such an exchange platform enables placing buy and sell orders, allowing you to profitably set a low purchase price and a higher selling price.

This is similar to how Amazon marketplace lets third-party sellers make money by selling first-hand or used products. You begin by creating an account in an exchange and register as a seller. Start with selecting and purchasing the in-demand, tradable cryptocurrencies available at the cheapest rate in any exchange. Hold it till you feel it is the right time to sell and earn profit. Once you set yourself up in the marketplace, add more payment methods, promote your prices, and enable other traders to purchase bitcoin swiftly via P2P mode.

To increase your odds of profiting, choose a payment method with not many offers in your region. For instance, leverage the marketplace by offering Google Pay collections or Bitcoin ATMs for regional traders. You can make more money via P2P bitcoin trading by targeting more countries and offering suitable foreign exchange to trade bitcoin for fiat currency.

Buy and HODL

One of the simplest ways to make more money with bitcoin P2P trading is by buying and holding it (or as crypto traders say, HODLing it). Here, you need to be an investor as you buy bitcoin from the P2P exchanges offering the lowest price and keep it for a while.

We have witnessed a steady but sharp price rise of crypto assets in the past few years, with early traders benefiting handsomely by HODLing certain cryptocurrencies like bitcoin. In fact, the price of bitcoin has increased by over 600 percent from October 2020 ($11,429, Oct 13th) to November 2021 ($68,062, Nov 9th). This method requires one to keep patience coupled with a secured wallet to store crypto coins.

Be a Bitcoin Lender

You can use crypto exchanges to lend bitcoin. First, you must purchase bitcoin on the exchange using your choice of payment method and then lend the cryptocurrency for a fee. Your profit is determined by the charges you apply for lending.

Additionally, many would offer loans with bitcoin as an escrow. It ensures that the lender and the borrower are safeguarded against any fraud and hidden charges.

If you’re interested in getting a loan, stake your BTC in the loan escrow and get up to 65% of the value of your BTC in Tether (USDT) loans. If the value of BTC increases significantly (more than the due), you may repay the loan and reclaim your BTC profitably.

The Bottom Line

Follow any of the above tips to start making more money with P2P bitcoin trading. P2P platforms offer many payment options and a quick, social trading experience.

Start your P2P trading journey with LocalBitcoins and connect to local buyers, safely and securely. With LocalBitcoins, you can start trading in various payment methods that guarantee flexibility to offer profits on selling bitcoin.

Author Bio — Harsh Agrawal is the Founder of CoinSutra, an online resource helping everyone to learn about decentralized finance and get started with it. Harsh is an international speaker and author who loves blockchain and the crypto world. Harsh is featured on Forbes, Microsoft, IBM, INC, and many well-renowned publications. Connect with Harsh Agrawal on Twitter at @denharsh.