If you’re new to trading Bitcoin, or having Bitcoin, there is one thing you need to understand right off the bat. Imagine that Bitcoin is cash, and that you are constantly holding it in plain view, and most of the places you can spend this cash can disappear overnight. This is to say, in Bitcoin the risk of a scam is high. In peer-to-peer trading, it has, over time, lowered, but it still exists.
This is why when you go to purchase your first coins on LocalBitcoins (in later articles we will cover other recommended peer-to-peer sites), the sellers will be taking a leap of faith on you.
If you have a brand new account, you will have no feedback. So your best bet is to start small. Note: you will need a LocalBitcoins account to create your first trade.
Also read: Acquiring Bitcoin: How to Avoid Centralized Exchanges
Step 1: Decide on Your Payment Method
This user prefers Paypal second to Bitcoin. It is the easiest and in some ways the safest way to send fiat currency over the web. On LocalBitcoins, you can use virtually any payment method that people accept. Anything from Google Play store credit, iTunes gift cards, Wal Mart gift cards, prepaid debit cards, you name it. But the markets that are most thriving are cash, Paypal, and bank deposits, as well as Western Union and Money Gram.
As the buyer, the odds are in your favor that the trade will conclude successfully for you. Most sellers are only looking to cash out their coins, not to scam. Using a reversible payment method further increases your safety, but the fact is that if you can prove to LocalBitcoins itself that you have sent the funds, they will force the release of the escrow. This is why, in this article, the writer will not recommend in-person cash trades, as there have been problems with those in the past. This is not to discourage a person who is secure in their person and believes they can make a good trade in person. It is for the safety of the greater general population that we suggest using digital methods, at least at first.
In this tutorial, we’re going to create a Paypal for Bitcoin trade on LocalBitcoins. It could as easily be a bank deposit trade, or a Western Union/Moneygram trade, or another form of trade.
Note: you always also have the option of buying Bitcoins by going through one of the sellers who has posted a trade. By creating your own trade, however, you have the ability to set your price and terms of trade.
Step 2: Create Your Trade
First, as shown below, click “Post a Trade.”
Begin filling out the form. It is pretty self-explanatory but there are some parts that need explanation. In the “price equation” field, you need to specify what you’re willing to pay. For this example trade, and so as to not waste anyone’s time, we’re going to set a discount of 20% on the coin. We do this by entering btc_in_usd*0.8 in the field. The price of Bitcoin in USD times .8, or 20% less than the price of a coin.
We also restrict the amounts people can pay, and set a high minimum and maximum amount of trade. While this is actually to ensure that no one wants to take the example trade, these tools are useful for limiting headache. You can say that the maximum amount per trade is $100 at first, for instance, and this will help you build up trust and feedback by doing multiple trades with a certain amount of funds to invest.
Fill in the terms of the trade. You can say anything you want here, and during any dispute the LocalBitcoins staff will consider these terms when making a decision. You can decide to only trade with people who have 100% feedback ratings, or a certain volume of trade, for instance. In Paypal, the typical terms include the type of payment that the buyer will send to the seller. Goods/services and family/friends have different fee structures within Paypal. Some buyers also decide to even that score by deducting the same percentage for those that need it sent as family/friends. This is not the most friendly approach, but the point is that you can be pretty creative here.
We also fill in the “payment window” time slot. This is the amount of time you will have to conclude the trade before it can go into dispute mode. Some people give themselves six hours, others give themselves 30 minutes. If you don’t mark the payment as complete within that window, then it is automatically canceled by the system. You also have the option of canceling any trade for any reason.
The next option is track liquidity. This allows you to only trade your investment amount, instead of allowing continual trades with the same terms. Then you can set some identification requirements and other bells and whistles at the end of the form.
Step 3: Publish Your Purchase Advertisement
When you’re ready, post it.
Now that your advertisement is published, you can edit it as the market changes. To get to the top of the list, you will want to offer higher amounts and more payment methods. This all depends on how eager you are to acquire more bitcoins.
In our next installment of Acquiring Bitcoin we will discuss the do’s and don’t’s of peer-to-peer trading. In later articles we discuss other methods of peer-to-peer trading, including those which are less used but still useful.