5 P2P crypto trading mistakes and traps to stay away from
Just because online crypto exchanges are highly marketed and used doesn’t mean they are the only ways to trade Bitcoin, Ethereum, XRP, and other cryptocurrencies. Peer-to-peer (P2P) crypto trading has grown rapidly as a preferred method for buying and selling crypto directly between users, all without the need for intermediaries and through the preferred payment solution and local currency. This type of trading offers more control, flexibility, and often better crypto prices than traditional exchanges. However, it also comes with unique risks that traders, especially newcomers, must understand in order to avoid common and often costly mistakes and traps.
By being aware of these pitfalls, you can approach P2P Bitcoin trading with confidence and protect your assets throughout every transaction.
Photo source: https://unsplash.com/photos/gold-and-black-round-ornament-ow-rGjlqJkM
What are traders resorting to the P2P method for?
First things first, it’s helpful to understand exactly why traders prefer buying and selling crypto directly with other users. There are a few reasons for this:
- Large-scale hacks are less prone to occur in P2P systems since they’re more user-oriented and flexible compared to other options
- P2P platforms usually ask for less personal information compared to centralized venues, thus improving anonymity and privacy – a boon for those who prefer to conceal their identity
- Traders can keep custody of their assets with P2P, which isn’t the case with centralized exchanges, where funds are held by the platform
- Usually, there are more types of payments available in P2P platforms compared to traditional ones
- No involvement from go-betweens can lower upfront costs due to the lower fees
- The possibility of negotiation can lead to more advantageous deals.
Doing poor, or nonexistent, background check
One of the costliest errors when trading peer-to-peer is failing to thoroughly examine the other trader’s reputation and identity. P2P transactions require complete trust between counterparties, as there’s no middleman to resolve conflicts should they arise. In traditional centralized exchanges, the platform acts as a responsible intermediary.
For increased safety, always verify key details, such as the counterparty’s trading history, user ratings, and verification of their identity. Avoid collaborating with users with low or no trading history, poor reviews, or no verification proof. Many scams originate from precarious undertakings, where traders rush to take deals despite the fact that the targeted account is new or has been unsatisfactorily reviewed. Taking the time to find out reputable counterparties considerably lowers your chances of falling into the trap of a fraudster.
Not acknowledging payment scams
Payment scams are a common sight in P2P trading so they should be acknowledged early. Fraudsters often pretend to be well-intended buyers or sellers, trying to trick users into offering crypto without receiving payment, or taking fake payments. So, what’s the best way to protect yourself against such risks? The escrow service is an effortless and safe solution – this holds the crypto safely until you and your counterparty confirm the transaction. It’s only releasing the money after you’ve gone through this obligatory stage.
It’s vital to never release crypto before ensuring that the payment has been received. Plus, you should never make or take payments outside the P2P platform, such as third-party apps or bank transfers, because such payments are difficult to trace. By relying on a trustworthy escrow platform and confirming payments, you can protect yourself from the bulk of payment-related scams.
Ignoring price fluctuations
The price tags you encounter on various P2P crypto markets vary widely and fluctuate depending on factors such as user demand, payment methods, and location. A common mistake is not comparing prices from more buyers and sellers in order to snag what’s really the best deal, risking falling for offers that are attractive on the surface but lack real value. Such ignorance can lead to paying more than necessary or selling below market value, thereby failing to capitalize on price movements.
To avoid such risks, take the time to check out more listings and current exchange prices before completing your intended trade. Remember that the offers that seem too advantageous to be true are likely not advantageous; they can even be scams or trades with unmentioned fees. Keeping an eye on market prices and comparing offers will help you get the best possible deal and avoid traps related to unrealistic pricing.
Skipping security measures
If you have experience with P2P trading platforms, you’ve likely found it tempting to skip those security measures and gain some extra time to familiarize yourself with the platform. From multi-factor authentication to cold wallet storage and KYC processes, there are several steps users must follow when setting up an account to ensure their safety. These steps are designed to mitigate the risks that users face when trading online, such as account takeovers or fraud.
Many P2P traders overlook these steps, leaving their funds and accounts vulnerable. Still, these steps are as quick and efficient as possible. For instance, one of the simplest yet most effective steps is enabling two-factor authentication (2FA) on your trading account. Most platforms support two-factor authentication (2FA) via apps like Google Authenticator or SMS codes, as this extra layer of protection helps prevent unauthorized access even if your password is compromised. Additionally, create strong, unique passwords for your accounts that don’t involve personal and obvious information like your pet’s name, and never share login details. Prioritizing security measures is crucial for protecting your cryptocurrency holdings from hackers and thieves.
Not knowing how to handle a dispute
Disputes between sellers and buyers are prone to occur, no matter how carefully you conduct your activity. Unfortunately, many traders wait until a dispute occurs to familiarize themselves with the platform’s dispute resolution processes, which leaves them unprepared when something doesn’t go as planned. To avoid being taken aback, ensure you learn the steps to file a complaint, should something occur, and gather evidence such as chat logs and payment receipts for additional defense.
Cooperate with the customer support agent to reach the most favorable outcome possible.
Endnote
Examining counterparties, utilizing escrow services, understanding pricing, and familiarizing oneself with the platform’s rules are essential steps for successful P2P trading. Make sure to prioritize safe trading activity!
