I lost a substantial amount of money chasing after fintwit plays, only to later discover that a majority of them were coordinated within groups. They would pre-load and then swiftly dump on us, which was rather disheartening.
Topic: OTC trading best practices (Read 89 times)
I would like to learn how to buy and sell Bitcoin outside of centralized or decentralized exchanges.
my background: I want to buy Bitcoin, hold Bitcoin for many years and eventually sell my Bitcoin again, when I need something (maybe buy food, pay rent or buy a house).
Which fiat-on/off-ramp to use?
Centralized exchanges (CEX)
☑ Good liquidity
☑ Good documentation for tax and AML requirements
⚠ Undermines Bitcoin
⚠ KYC gives criminals your home address and endangers your family
Using CEX gives you good liquidity and little trouble with the authorities. You can easily prove your source of funds and have sufficient documentation for tax authorities. If everyone uses centralised exchanges, it undermines the censorship resistance, permissiveness and decentralisation of Bitcoin. Know your customer (KYC) on the CEX links all your bitcoin addresses to your name and home address. As long as your government allows it, you are free to use the exchanges to buy or sell Bitcoin. As long as your government allows it you are also allowed to keep your Bitcoin, if your government decides you should not have any Bitcion they can tax your holdings at 100% or send the police to knock on your door. More worryingly, KYC data is occasionally hacked, allowing criminals to prioritise their victims for $5 wrench attacks, which can lead to the torture and death of you or loved ones.
Decentralized Exchanges (DEX)
⚠ You may purchase Bitcoin that is not accepted by CEX or merchants due to your Bitcoin's blockchain history.
⚠ DEX run the risk of being destroyed
☑ Does not leed criminals to your home
Decentralised exchanges don't record your home address. Data that isn't recorded can't be hacked, protecting you from criminals. However, governments seem to prefer CEX exchanges, while privacy-focused bitcoin tools are being shut down.
While the founders of Samourai Wallet are in jail and Agoradesk and Holdhold have been shut down, Bisq is still up and running. But it is entirely possible that the government will attack the programmers of Bisq and shut it down as well. While I like Bisq, it should not be my only way in and out of Bitcoin.
Free Trading (FT)
☑ very decentralized
⚠ low liquidity, high time requirements to vet trustful counterparties
⚠ poor documentation for tax and AML requirements
I would like to build network of maybe 10 people. 5 of which I can sell to, 5 of which I can buy from. Those people would not know my home adress.
Advantage of FT over a CEX: Your counterparty has much less information about you than a CEX. They do not know your home address, nor do they keep a copy of your passport. In addition, a private individual is less of a target for a hacker than a KYC service that stores millions of KYC records. FT protects you from criminals visiting your home.
Advantage of FT over a DEX: FT communication works via mobile phone, signal, telegram, email and is therefore much harder to attack than a DEX software that needs hosting, domains, programmers, etc. The next advantage of FT is that you know your counterparty. The source of the Bitcoin, the source of the fiat and the trustworthiness of the counterparty is known.
➤ I would like to build network of maybe 10 people. 5 of which I can sell to, 5 of which I can buy from.
Questions:
❶ Do you have experience buying / selling Bitcoin outside of dentralized or decentralized exchanges?
❷ How to find counter parties?
Forums, Telegram
❸ How do you protect yourself when you meet a new counterparty to trade a signifikant amount in person?
I have found some groups on Telegram where you can find counterparties to buy or sell bitcoin. However, I can see some risk of being robbed or kidnapped when you meet your counterparty in person.
❹ How do you document your transactions for the tax authorities?
If you pay from your bank account, you could keep a record of your bank statement and the Bitcoin address. A cash withdrawal is likely not sufficient documentation for your OTC Bitcoin buy.
my background: I want to buy Bitcoin, hold Bitcoin for many years and eventually sell my Bitcoin again, when I need something (maybe buy food, pay rent or buy a house).
Which fiat-on/off-ramp to use?
Centralized exchanges (CEX)
☑ Good liquidity
☑ Good documentation for tax and AML requirements
⚠ Undermines Bitcoin
⚠ KYC gives criminals your home address and endangers your family
Using CEX gives you good liquidity and little trouble with the authorities. You can easily prove your source of funds and have sufficient documentation for tax authorities. If everyone uses centralised exchanges, it undermines the censorship resistance, permissiveness and decentralisation of Bitcoin. Know your customer (KYC) on the CEX links all your bitcoin addresses to your name and home address. As long as your government allows it, you are free to use the exchanges to buy or sell Bitcoin. As long as your government allows it you are also allowed to keep your Bitcoin, if your government decides you should not have any Bitcion they can tax your holdings at 100% or send the police to knock on your door. More worryingly, KYC data is occasionally hacked, allowing criminals to prioritise their victims for $5 wrench attacks, which can lead to the torture and death of you or loved ones.
Decentralized Exchanges (DEX)
⚠ You may purchase Bitcoin that is not accepted by CEX or merchants due to your Bitcoin's blockchain history.
⚠ DEX run the risk of being destroyed
☑ Does not leed criminals to your home
Decentralised exchanges don't record your home address. Data that isn't recorded can't be hacked, protecting you from criminals. However, governments seem to prefer CEX exchanges, while privacy-focused bitcoin tools are being shut down.
While the founders of Samourai Wallet are in jail and Agoradesk and Holdhold have been shut down, Bisq is still up and running. But it is entirely possible that the government will attack the programmers of Bisq and shut it down as well. While I like Bisq, it should not be my only way in and out of Bitcoin.
Free Trading (FT)
☑ very decentralized
⚠ low liquidity, high time requirements to vet trustful counterparties
⚠ poor documentation for tax and AML requirements
I would like to build network of maybe 10 people. 5 of which I can sell to, 5 of which I can buy from. Those people would not know my home adress.
Advantage of FT over a CEX: Your counterparty has much less information about you than a CEX. They do not know your home address, nor do they keep a copy of your passport. In addition, a private individual is less of a target for a hacker than a KYC service that stores millions of KYC records. FT protects you from criminals visiting your home.
Advantage of FT over a DEX: FT communication works via mobile phone, signal, telegram, email and is therefore much harder to attack than a DEX software that needs hosting, domains, programmers, etc. The next advantage of FT is that you know your counterparty. The source of the Bitcoin, the source of the fiat and the trustworthiness of the counterparty is known.
➤ I would like to build network of maybe 10 people. 5 of which I can sell to, 5 of which I can buy from.
Questions:
❶ Do you have experience buying / selling Bitcoin outside of dentralized or decentralized exchanges?
❷ How to find counter parties?
Forums, Telegram
❸ How do you protect yourself when you meet a new counterparty to trade a signifikant amount in person?
I have found some groups on Telegram where you can find counterparties to buy or sell bitcoin. However, I can see some risk of being robbed or kidnapped when you meet your counterparty in person.
❹ How do you document your transactions for the tax authorities?
If you pay from your bank account, you could keep a record of your bank statement and the Bitcoin address. A cash withdrawal is likely not sufficient documentation for your OTC Bitcoin buy.
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