How P2P Bitcoin Marketplaces Differ From OTC Exchanges

May 29, 2020

Throughout the many years of bitcoin’s development, different ways to purchase coins have emerged. Not only are people able to connect their banks with BTC exchanges, now, you can pretty much buy BTC with any imaginable payment method. Let’s dive in.

Starting from the beginning

The first way of purchasing BTC—which remains prevalent and extremely popular until this point—are traditional bitcoin exchanges. These exchanges are still (arguably) the easiest way to get your hands on BTC as these platforms will often require you to link a bank account to the exchange. In turn, the process of buying and selling BTC is streamlined through the exchange.

On traditional bitcoin exchanges, buyers and sellers are matched via order book. Once matched, the platform acts as a middleman that helps mediate the trade. 

However, because the platform acts as a middleman, fees are often higher. Another problem with traditional bitcoin exchanges is that not everyone has access to a bank account—it’s either limited access or no access at all. 

Luckily, people have developed new ways to buy bitcoin.

OTC bitcoin trading

Over-the-counter (OTC) bitcoin trading has gained traction over the years, allowing individuals to move large amounts of BTC anonymously. 

These trades often rely on brokers who negotiate directly with buyers and sellers. To participate in an OTC trade, you’ll first need to get a hold of an OTC broker (sometimes, they can reach out to you) and let him/her/them know that you’re interested in buying or selling. You’ll then need to go through KYC procedures. After getting to know your broker a little more, he/she/they will then look for a “qualified” counterpart for the trade. When found, the negotiations for trade size and price will begin. After negotiations, it’s time to transfer funds. More often than not, brokers will make use of third-party escrow services to ensure the safety of the trade. Once both parties have transferred funds to the custody provider, it’s the broker’s job to then distribute the funds. 


The biggest benefit of OTC trading is anonymity. Because you’re dealing strictly through a broker, the process allows you to have a certain level of privacy. Additionally, if you’re making significant purchases/sales, the market won’t be disrupted. 

As compared to traditional bitcoin exchanges, brokers will charge lower fees—making OTC trades a more affordable option. 

As mentioned earlier, OTC trades also allow people to move large amounts of money. Traditional bitcoin exchanges often make it difficult to trade bigger amounts because of order limits. OTC desks have customizable trades, eliminating any restrictions present.


The biggest risk of OTC trading involves settlement. On a traditional bitcoin exchange, the platform is responsible for holding the funds and distributing them to the traders as soon as the trade is executed. On OTC trades, you’ll have to find a reliable OTC broker to handle your money (which is why many brokers make use of escrow services). 

OTC trades can also be a little time consuming as compared to traditional bitcoin exchanges and peer-to-peer bitcoin marketplaces.

Peer-to-peer bitcoin marketplaces

A peer-to-peer bitcoin marketplace works the same way as a traditional bitcoin exchange in the sense that P2P marketplaces also make use of order books to match buyers and sellers. 

Buyers will go on a P2P platform, input their trade preferences (payment method, preferred fiat currency, location, etc.), and search through a list of offers. Each offer is unique as each will come with different prices, payment methods, offer limits, etc.—and it’s up to the buyer to choose an offer with his/her preferences in mind. Once a buyer chooses an offer, he/she and the seller are matched and the trade begins. 

Unlike traditional bitcoin exchanges (which help the traders conduct the trade), peer-to-peer platforms will often have little to no interaction with the traders. Instead, the buyer and seller hash the trade out themselves (the buyer will have to follow specific payment instructions from the seller). Once the buyer sends the payment, the seller will review and verify it, and then release the BTC from escrow. 


Peer-to-peer marketplaces personalize the entire trading experience—which allows platforms to have hundreds of payment methods available. Also, peer-to-peer platforms will often charge less fees as they have less interaction with trades as compared to OTC trades and transactions on traditional bitcoin exchanges. In turn, these two features can make peer-to-peer platforms more cost-efficient. 

Also, unlike traditional bitcoin exchanges, peer-to-peer platforms will not require users to link their bank accounts—allowing for more inclusivity on the market. 

To battle scammers on the platform, peer-to-peer platforms will often implement KYC (with some of the best examples allowing same-day verification) and security protocols (escrow systems, 2FA, good customer service teams, and many more). 


With the option of cost-efficiency comes the loss of anonymity. Peer-to-peer platforms, no matter how cost-efficient they can be, often entail a more “public” approach to trading. Although they’re not completely public, trades on peer-to-peer platforms aren’t as anonymous as OTC trades and transactions on traditional bitcoin exchanges. This trade-off is the “downside” of a more personalized trading experience. 

Peer-to-peer platforms also aren’t that ideal for larger trades as there are trade limits for each offer. If you’re looking to trade a significant amount on a peer-to-peer platform, you might have to split it up into several trades (which may not be ideal for most traders).

P2P vs. OTC

Overall, no form of trading is completely better than the other—each is suited for different styles of trading. 

OTC trades are for larger and more anonymous trades (especially if you don’t want to affect market movement). P2P trades are ideal for small trades (as you can trade as low as $10) and running your own crypto business (build business relationships with users you trade with frequently). It all boils down to what you’re looking for when you trade. 

As many popular exchanges add OTC features to their platforms, it’s clear to see that the demand for OTC trades are on the rise. However, the number of peer-to-peer trades are also on the rise as they have the ability to create real-use opportunities for people all around the world. 

With all that said, why not give both a shot and see which works for you?

Disclaimer: This article is sponsored by Paxful

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