LocalBitcoins is a Bitcoin custodial peer-to-peer exchange that has been around since 2012. It has an excellent reputation and a large geographical footprint.
LocalBitcoins is a peer-to-peer (p2p) marketplace that allows buyers and sellers to directly communicate and trade Bitcoins. In this post we’ll review the service and also dispense some tips on what to look out for if you’re new to it.
Unlike most bitcoin exchanges, that match buyers and sellers in an automated process, LocalBitcoins allows users to communicate directly. LocalBitcoins is like the Craigslist for buying and selling bitcoin. Its sellers offer a wide variety of payment options and the built in escrow makes the process secure.
Having said all that, since anyone can become a seller there is a lot more room for scammers on this platform.
In a nutshell, LocalBitcoins is a good place to go to buy bitcoins when you can’t find your requested payment methods anywhere else or you don't have other exchanges available in your country. However, prices are usually higher on this platform and you have to do your due diligence to avoid getting scammed.
LocalBitcoins allows for secure trading through the use of several measures:
Until recently, LocalBitcoins acted as one of the main places you could still buy Bitcoins anonymously. However, as new legislation came into play, LocalBitcoins now verifies customer identities with traditional KYC (Know Your Customer) processes. Additionally, the option to buy Bitcoins with cash was removed from the site. If you're specifically looking for an option to buy bitcoin with cash, check out LocalCryptos.
LocalBitcoins itself doesn't accept any fiat currencies or payment methods since it's not involved in the payment occurring between buyer and seller. It's entirely up to the sellers to decide which currency and payment method they want to accept. The good news: there are trades available in most countries and you can easily search for them by filtering for your currency.
Users on the site accept a variety of payment methods including:
Since you’re buying and selling to individuals, you won’t be able to use a credit card. However, you can use your credit card to load up your Paypal or Transferwise wallet and then use your balance to pay a seller on LocalBitcoins.
Keep in mind that different payment methods will result in different exchange rates, since some methods are riskier than others. For example, sellers willing to accept PayPal are usually selling bitcoin at a premium to the market price. There's two reasons for that: 1) buying bitcoin with PayPal is in high-demand 2) the method can be risky for the seller since the buyer can initiate a chargeback after the trade, potentially leaving the seller with nothing.
Because of this, you will usually get the best price for buying Bitcoins using an irreversible payment method such as cash deposits or wire transfers.
Registering for an account and buying Bitcoins on LocalBitcoins is completely free. LocalBitcoins users who create advertisements are charged a 1% fee for every completed trade. So basically, only the people who are actively promoting their services (i.e. makers) are being charged.
Bitcoin transactions to wallets of other LocalBitcoins users are also free of charge. Each time you send Bitcoins outside of LocalBitcoins, you will only be charged the standard Bitcoin Network fee, which varies depending on how crowded the network is.
It’s highly recommended not to leave your Bitcoins lying around in LocalBitcoins’ wallet and to move it to your own secure Bitcoin wallet.
For the complete fee schedule you can visit this page.
Depending on your verification level you’ll have different buying limits:
T0 – Requires your name, country, email address and phone number. The limit for trade is €1,000/year. T1 – Requires T0 + physical address, ID verification and KYC info. The limit for trade is €20,000/year. **T2 **– Requires T1 + Proof of residence. The limit for trade is €200,000/year. T3 – Requires T2 + extra ID verification. There is no limit for trade.
Aside from LocalBitcoins, there is one more peer-to-peer marketplace with similar trade volume and popularity called Paxful. Paxful is popular for small trades and settles more trades than LocalBitcoins, whereas LocalBitcoins features fewer but larger trades. Moreover, outside of the US and Europe they have different regional focus. LocalBitcoins is more popular in Latin America whereas Paxful is strongest in Africa.
Before we go into how to use LocalBitcoins safely make sure to watch this short video on how to use the platform.
LocalBitcoins is a great platform, however sometimes the traders on it are not so great. At the end of the day, you’re trading with strangers so you have to make sure you’re taking precautions.
After filtering out your sellers by the preferred location and payment method, you need to choose who you are going to deal with. As a rule of thumb, DO NOT CHOOSE A SELLER BASED ON PRICE.
Sometimes it’s worth paying 5% more in order to conduct a transaction with a more reputable seller. Look at the seller’s transaction history and see how he was rated in past transactions.
Also, don’t post a request to buy Bitcoins, that will just attract a lot of scammers. Instead, look for people who are actively selling Bitcoins as they are probably more legit.
Go over the seller’s profile and make sure that he or she qualifies as follows:
If you follow these strict rules then you’ll probably be fine. If you can’t find a seller that matches all of the above, try to find the next best thing. The idea is to do your homework and see that the seller has actually completed large successful trades in the past. Below is a screenshot of a profile of a trader that looks trustworthy.
You can also search the LocalBitcoins’ forum for that seller’s username. If any complaint comes up, you’ll probably find it there.
Send a message to the seller requesting a trade and wait for their response. DO NOT:
If any issue arises, try solving it with the seller first. Don’t worry about losing money, since you are protected by LocalBitcoins’ escrow service. Keep in mind that if you’re totally new to LocalBitcoins, “power sellers” may not want to trade with you because you do not have enough feedback yet. This means you may have to make a few small trades with less trustworthy sellers in order to bump up your feedback so you can deal with the more respected sellers.
LocalBitcoins offers a variety of payment methods for buying Bitcoin. However, this flexibility usually comes with a higher price tag and is also a magnet for scammers, so you’ll need to do extra background checks before getting into a trade. If you can’t find a regulated exchange that supports your country or requested payment method, more often than not LocalBitcoins will have a solution for you, just make sure to follow the safety tips we’ve detailed in this post.
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