Peer-to-peer bitcoin trading is growing where exchanges aren’t
Bitcoin seems to be getting used for its intended purpose, albeit on a relatively small scale.
LocalBitcoins started in 2011 with an investment of just a few thousand dollars. These days, it's making $27 million a year by serving its millions of customers. Not bad for a website that's basically a noticeboard with payment options.
That's because it's a bitcoin noticeboard where people go to buy and sell bitcoin peer to peer. People simply post messages saying how much bitcoin they want to buy and sell for fiat currency, the prices they're offering and the payment methods they accept, including bank transfer, prepaid debit cards or cash in hand at an agreed meeting spot.
Globally, its popularity has tended to mirror bitcoin prices, much like any other cryptocurrency exchange, where everything tends to get busier as prices rises. December saw some major spikes in volume, and it hasn't really died down since.
But this pattern looks very different in different countries. LocalBitcoins is small potatoes next to the biggest exchanges, which might turn around as much in a day as LocalBitcoins does in a year, but it's one of the biggest games in town in some places.
Pronounced spikes tend to appear whenever and wherever it's difficult to buy bitcoin in other ways.
When Chile's exchanges recently clashed with banks, people simply started going peer to peer for their crypto purchases rather than using the major exchanges. This pattern was felt all around Latin America because the entire region uses mostly Chilean exchanges.
The same thing just happened in India as news emerged of a hard crackdown on its exchanges, and in Canada, massively, following a bank's decision to bar customer cryptocurrency purchases.
This highlights the difficulty of effectively banning or otherwise cracking down on cryptocurrencies. Much like other illicit-ish asset classes, people find a way to get what they want.
The trade volumes also mirror situations in other countries, where countries without a lot of exchange infrastructure tend to get consistently higher volumes and sharper spikes.
Interestingly, the volumes also suggest a certain amount of everyday cryptocurrency use in some places. LocalBitcoins has seen high and sustained volume in Nigeria and Venezuela. Unsurprisingly, it's also seen exceptionally consistent growth in US dollar volume, much of which is likely taking place in countries other than the USA. This suggests that LocalBitcoins has become something of a mainstay in these areas as one of the chosen systems for converting crypto to fiat and vice versa.
On both the national and international scale, financial regulations tend to get enforced through banks. But because it bypasses banks entirely, bitcoin is largely immune to these conventional regulatory measures. Against all odds, it seems that bitcoin is actually being used as intended, albeit on a relatively small scale so far, as a digital currency that moves beyond established financial institutions.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, BTC and NANO.