How Gift Cards Fuelled P2P Bitcoin Trading

Global weekly peer-to-peer (P2P) crypto trading volume has seen huge developments in the past five years, growing by more than USD 60m, with a significant driver being Paxful exchange, whose users are keen on using gift cards as the preferred payment solution on the platform, states the latest research report by Arcane Research.

Bitcoin P2P
Source: Adobe / Rizu Designs

According to “The State of Crypto: The P2P Market” October report, the weekly volume has grown from an average of USD 10 million seen in the summer of 2015 to its current levels of USD 74 million.

The recent surge in the global P2P bitcoin trading volume, said the report, is driven by Paxful’s expansion and intensified marketing efforts in the so-called frontier markets like Sub-Saharan Africa and Asia. It is precisely these markets that brought new trading volume to the platform and allowed Paxful to establish itself as the market leader in terms of bitcoin P2P trading, it said.

Despite the growth in the P2P transactions, the weekly global bitcoin P2P trading volume is still quite far from topping its all-time high, which was reached during the peak of the 2017 bull market. From December 10 to December 17 of 2017, the global weekly P2P trading volume was above USD 150 million worth of bitcoin (BTC) transactions.

Global weekly bitcoin P2P trading volume arcane research

Breaking down the nature of P2P transactions on Paxful, the report also found that the most popular payment method is gift cards. For example, they accounted for 48% of the total trading volume on the platform as of June 2020.

weekly bitcoin P2P trading volume sorted by payment method

Per the report, the gift card payment is flexible and allows buyers to buy bitcoin indirectly with cash through popular gift card purchases at gas stations. Later, those gift cards are being sold on Paxful for BTC, and this is done at a significant discount of 40% - the buyers receive 60 cents of BTC per dollar spent.

As Matt Ahlborg of UsefulTulips explains it:

“Immigrants in western countries transfer value abroad via gift cards on Paxful. The gift cards are purchased by the immigrant at a local store. This gift card is then photographed, and the photo gets sent to friends and family abroad. They later sell those gift cards on Paxful for BTC. Then, they convert the BTC to local currency by selling the BTC to a buyer in the local market via one of the P2P-platforms.“

The report found that, despite the associated fees, the process is fast, reliable, and is in many ways more efficient than the traditional remittance method of depositing cash with Western Union.