When Jesús started using bitcoin (BTC) in Venezuela, the best option to exchange to bolivars was LocalBitcoins. At least that’s how he was introduced to it and was able to experience it from the beginning.
Then, as he was learning and experimenting in the world of cryptocurrencies, new options appeared and LocalBitcoins became less and less friendly. The deposit fees increased a lot, the volatility of the currency affected his weekly expenses and he ended up migrating, like many others in the country, to Binance.
Jesus’ story is reiterated, details aside, by every person contacted by CryptoNews. Until a few months ago, LocalBitcoins was his favorite platform to transfer his BTC to the local currency. And now, without exception, the ten people consulted do not use this medium.
This is not only happening in Venezuela, one of the leading P2P trading countries in the world. We also talked to people in countries like Argentina, Spain, Panama or Peru. In all places it was the same: LocalBitcoins was the preferred site for users, but now they have not been accessing their respective accounts for months.
Among the reasons for their respective exits from the platform, other users allude to problems with the data verification mechanisms under the KYC(Know Your Costumer or Know Your Customer) criteria, whose requirements have been steadily increasing , at least, since 2019.
The latter was the case for Karla, whose account in Panama was blocked for months due to excessive response times for the review of her credentials. “They blocked my account with KYC without notice and left me for more than 6 months blocked waiting for review,” she told us.
What has happened?
The landscape of bitcoin (BTC) P2P trading has changed dramatically in recent months. LocalBitcoins, once the undisputed leader among exchanges of this type, has lost its throne, with a precipitous drop in its overall trading volumes.
Volumes, which at the beginning of the year hovered around $40 million per week, are now less than half that. Data from sources specializing in tracking these markets, such as Coin Dance or UsefulTulips, coincide in reflecting this drop.
If we go further back, towards the historical trading highs of the Finland-based platform, the situation is even more compromising. From the peak of almost $130 million during the penultimate week of December, the situation is even more compromising.From the
18 million in the last week, there is an 86% drop in trading volume on LocalBitcoins.
Trading volumes on LocalBitcoins have fallen to levels of four years ago (each color corresponds to a region). Source: UsefulTulips.
During the same week in 2017 that we took as a benchmark, one of this exchange’s main competitors, Paxful, barely moved just over $10 million, less than a tenth of what was traded on its counterpart.
Historically, this platform was far below the volumes handled by LocalBitcoins. But now, Paxful doubles the weekly volume of its competition, with almost $40 million during the most recent week. And that’s even though Paxful hasn’t served Venezuelan users since September
2020. In contrast to LocalBitcoin, Paxful has significantly increased its trading volumes (each color corresponds to a region). Source: UsefulTulips.
The new kid on the block
But it gets worse. It’s worth noting that we’re not counting the volumes of another very relevant competitor: Binance
. The exchange has become quite an empire in the cryptocurrency world, with a diversity of products, services and trading pairs that none of the aforementioned exchanges offer.
They added peer-to-peer trading to their product offering just under two years ago, although it was in 2020 that they made a strong entry into the Latin American market
. However, Binance’s trading volumes are not public, unlike the other P2Ps, and when this medium has requested that information, the response has been negative.
But how do we know that Binance has an important part of the market that LocalBitcoins used to move? The answer lies with the users. The totality of those interviewed for this work assured to have migrated to Binance, after considering LocalBitcoins as a less adequate option for their needs. And if we enter this exchange, we will see not only a large number of offers to buy and sell BTC in several of these countries, but with other cryptocurrencies such as the stablecoin
The reasons vary slightly, but users agree on essential aspects, which summarize the words of Mario, also from <a href=”https://www.criptonotic
Ease of managing funds. I could freeze BTC to USDT in case of price drops, considering my whole economy is bitcoinized. Also, and I think this is the main factor, is that [Binance] didn’t charge me to deposit, which sometimes made me lose up to $7 per deposit at LocalBitcoins. I moved to Binance because it offered me a lot of advantages, like having an app that worked really well. Local doesn’t have an app, and has a lot of bugs in its interface.
Mario, former LocalBitcoins user in Venezuela,
what would have to happen for you to go back to LocalBitcoins?
All of the P2P marketplace users consulted for this work abandoned LocalBitcoins and don’t seem to have any intention of resuming their operations on that exchange. In addition to the above cases, they also question the user interface and point with emphasis to the absence of a mobile application that facilitates trading on LocalBitcoins away from a computer.
“The platform is older and unfriendly, but I was still using it because there were no offers on Binance. Now there’s a bit more to P2P and I was able to switch,” says Karla from Panama, where the world’s largest P2P exchange
took longer to accumulate users than in places like Venezuela.
What would LocalBitcoins have to do to win her back as a customer? In addition to updating their interface, making it “friendlier”, they would have to reduce commissions, improve KYC evaluations.
Marcos, from Venezuela, sums it up:
To get back to Local they would have to have their own app, let handle other types of exchanges, like USDT, improve the search filters [referring to the user interface] and stop charging commissions for depositing.
Marcos, Binance user who migrated from LocalBitcoins.
Some of these steps, they have already started to take: just weeks ago we reported that the exchange eliminated charging
deposit fees, one of the big complaints of its users. Already at LocalBitcoins they don’t charge a fee for depositing BTC. Source: LocalBitcoins –
What is LocalBitcoins’ response?
In direct contact with CryptoNews, LocalBitcoins spokespersons downplayed the fall in trading volumes that the platform has experienced in recent times. In fact, they argue that this is a natural part of this market: a high volatility that “will continue for the foreseeable future as well,” in the words of Jukka Blomberg, CMO (chief marketing officer) of the
As to the reasons for the exit of so many users from its exchange system, Blomberg claims that the world of cryptocurrencies is a “still very young” industry. And user interest could have been dented by the fact that bitcoin’s price has stalled in the market after setting a new high
in mid-April this year.
He also touched on the KYC issue, acknowledging that they can’t cater to all customer segments, due to regulatory issues.
We can’t cater to all customer segments that, for example, a market that doesn’t do KYC or doesn’t follow AML [anti-money laundering] guidelines can. Those two, of course, have a big influence on the volatility of the business.
Jukka Blomberg, CMO of LocalBitcoins.
To that industry volatility the executive describes, he adds that competition in the P2P space is likely to continue to grow. “More and more non-P2P companies will continue to enter the market, which we see as a sign of a healthy and growing industry,” he added.
Jukka Blomberg is head of marketing at LocalBitcoins. Source: YouTube.
As we said, already the company has taken certain steps that can be seen as a response to the situation. To the removal of BTC deposit fees, Blomberg adds a plan that is already underway, “we will be launching a mobile app and a new website in the coming weeks.”
“What matters, however, is the value, security and confidence we can bring to our global customer base. We believe this is a simple recipe for customer happiness and, therefore, for the long-term success of our business,” concluded the Finland-based company’s spokesperson.