Bitcoin Forum

Hello,

I see alot of ofers on paxful from Nigerians, buying bitcoins on loss.
For example for 4000 NGN in Bitcoin you receive 4500 or more in NGN.

Whats the deal? I see some of those traders are doing this for a long time and they have thousands of good reviews.
I mean I heard they have some problems with their local curency. How do they profit from this

I have seen a post from CryptopreneurBrainboss, I guess it was in his currency exchange thread. He was also offering higher price than the current market which means he was buying in loss. I wanted to ask him how he does this but then I forgot about it and never carried it out. You post remined me this and hopefully CryptopreneurBrainboss will be able to give us some knowledge.

I found something interesting and believe this is the reason for his premium price.

If you go to a Nigerian exchange https://nairaex.com/# the price of BTC is currently
BUY:
4988558.36
SELL:
4913461.78

The price of Naira according to https://www.xe.com/currencyconverter/convert/?Amount=4%2C900%2C000&From=NGN&To=USD
is 1 NGN = 0.00262157 USD

So 1BTC is being traded there for 13000 USD when most exchanges have it for about 10800

Does this premium have something to do with the fact that Naira fell from 0,00275 to 0,0026 USD this year? Even then the premium shouldn't be this high.

To the average users who doesn't know how the Naira value in the country works, he/she might think we're buying at loss but that isn't the case, although some times we might end up in loss due to the nature of the inflation of the currency. There's quite more that I have grown to understand in rending exchange service which for some personal reasons I won't be sharing but here's basically what goes on in the Nigeria market. Lets say officially, the price of trading 1 dollar to naira could be N389 (approximately N400) but that isn't usually the rate in the cryptocurrencies market, it's always higher. So don't be decieve by the rate google or most peer2peer exchanges gives you.

Using your examples above, For N4000 (google rate) worth bitcoin the buyers pays N4500 that means he/she is buying at the rate of N450/$ immediately that user can move the funds to either Binance or probably Luno and sell above the buying price to make profit. Currently binance is trading at 1 USD for N466 and Luno trading at 1 USD for 460. There are other exchange that could be offering far better deals like the likes of patricia, remitano etc.

Basically you can make massive gains buying bitcoin and reselling almost instantly. Many buyers aren't interesting in going through all the stress of trading with this centralized exchanges out there so they look for alternative and easier ways to transaction which most peer2peer exchange offers.

NB: Most Nigeria trade peer2peer and there could be scenario where there's a surge in the market resulting to buyers willing to pay as much as N500+ per dollar worth Bitcoin which the seller bought around N450 or less per dollar not too long ago. (E.g last post halving FOMO) Hope i answered your question to your satisfaction.

Brainboss have answered the main part of the question, but there is need to also know that on Paxful, individual traders (buyers and sellers) are setting their price, not the exchange that is setting it. So, for example, if bitcoin is at the price of $10000, there are buyers that will set it at varying prices and also sellers setting it at varying prices. So, using Paxful as an example does not matter in this case. Assuming, if it is the exchange that set the price, it would have been a good example. I have ones used Paxful before, even the price the traders set can be changed by the traders upon dialogue after series of negotiations that both parties agreed upon. The price set by the traders may not actually be the price they will buy or sell.

There was a day I want to sell bitcoin on Paxful, the buyer told me to reduce around $2.5 in the local currency that he can not pay more than that. I was in haste, and I had to sell it, it happens like that on paxful, the buyer or the seller can be in haste to trade. So, saying they buy bitcoin in loss is not actually what is happening if you have used the exchange before.

I think you understanding is wrong. It just mean that Bitcoin has a higher value because the conversion rate with your 4000 NGN in Bitcoin you gain 4500. It means you have a profit of 500 with 4000 investment, they're not in loss in fact their gaining money from the Bitcoin they hold, and the more it increases the higher you get when you convert to your local fiat.

Nigeria's currency is facing some issue during thus pandemic. Before this period, it was N360 to $1 but now it has skyrocket to N450-N480 and this rate changes often which might accounted for the higher price.

Well, CryptopreneurBrainboss has already provided us with a sufficient answer.

If I may add something, the point is that, one, nobody would buy Bitcoin at a loss if there are other options and, two, the price of Bitcoin in other countries may be way more expensive than the global price. I have read a number of times that some countries in Africa, South America, and the Middle East have so high premiums on Bitcoin.   

If you want to get more clear benefits, like you said, you have to hold on to the price so that bitcoin continues to rise, but if there are domestic problems where the fiat value also drops from the dollar, then it can be that you get not as much profit as expected. the main thing can happen is that the domestic currency exchange rate is unstable so that it is like receiving a loss even though it is not because the price of bitcoin is still rising because the value of the local currency falls compared to the dollar.

I think this is normal at exchanges like paxful or local bitcoins. The exchangers will buy bitcoin from you at a slightly higher price than the exact market value and if you sell them the bitcoins, they will give you slightly lower rates than the market bitcoin value. This is being done because those exchangers need to earn profit from this buy and sell.

That is their strategy and even we know that they buy bitcoin on loss but in reverse  they can still make profit after selling bitcoins in other crypto exchange at a higher price more than the price whey they but it.

BTC prices vary a lot based on where you live. This is why cross country arbitrage is so popular around the world. I know people who bought and sold cryptocurrencies through exchanges located in USA, China, India etc and made bank thanks to the margins.

As Brainboss pointed out, it is the same in countries like Nigeria where it is possible to make bank even if they buy BTC at higher than normal values.

Brainboss touched on vital areas but I will also like to add that, "No one does business in unmitigated and clear loss". There is always something to savour.

Bitcoin is gaining a huge following in Nigeria and most people who buy do so to hodl. Most of these people aren't conventional traders and wouldn't want the hassle of going through exchange(s) to buy cheap because that would entail registration and KYC and all that. It may be too much stress for them so they go through P2P either on WhatsApp, Telegram or Facebook groups to buy or sell and are done with it, not minding the price. Most of them don't even know they're paying higher. The frenzy and "bragging right" of owning a fraction of a Bitcoin outweighs whatever perceived cost there is to these Nigerians.

I don't have experience in Nigeria but I believe this is because in countries where they have a really bad inflation, I guess like Nigeria does, then the official exchange rate is bullshit. You will never get that rate at a real exchange.

Plus, Nigerians are betting that their currency will get ever weaker while Bitcoin gets ever stronger. I'd offer the same good rate to buy Bitcoin in my country if I'm honest.

I got the logic from CryptopreneurBrainboss, now I know the reason why people tends to buy something that is a little above the normal prices because somewhere out there, there is a market where the price of Bitcoin is much more because of the actual currency conversion difference.  People tends to rely on google too much which lead to missing out many important actual information, and wise trader take advantage of this price conversion difference in order to gain profit really fast.

Thanks for that explanation CryptopreneurBrainboss. As I've understood, it's called arbitrage.

It has called the attention of OP and thought that those people are doing it at loss. But thanks to the clear and concise explanation, they wouldn't do that for so long if they're in the loss, they're gonna go out business if there's no benefit from it.

No one does business at a loss, everyone has to accept that.  I agree with what CryptopreneurBrainboss said.  There is no room for disagreement with his arguments.  However, I would like to express some of my own views. Many times rumors spread in poor and least developed countries and these rumors are believed by the common people without any thought or analysis.  The same thing can happen with Bitcoin.  There may be rumors in Nigeria that the price of bitcoin will go up a lot in a few days, so maybe ordinary bitcoin users want to buy and hold bitcoin at a higher price.  So they are buying bitcoin at a higher price.
Special Note: This is totally my own opinion.

Well, CryptopreneurBrainboss has explained about Nigeria, and definitely, explanations are reasonable enough. If you use Google price or you Local USD/Fiat price then you will think more country's resellers buying Bitcoin at loss. But reality no one losing if it's not for volatility. I will express my today's experience, so you will get how these reselling businesses going on.

For privacy reasons, just imagine my local currency (fiat) name is "XYZ". Usually, 1USD = 74 XYZ in my country. But I sold my $100 (BTC) for 7900 XYZ. You may think the reseller bought in 500 XYZ loss. But the reality is different, someone on the other end had been waiting to buy it for a higher price. Its because our banks and governments don't accept bitcoin. So there is no other way to trade bitcoin except peer 2 peer trading. Even it was accepted by the government and banks but there will be a high transaction fee and tax, so peoples will like to trade peer 2 peer. That's how the price goes up locally.

From the above explanation I can understand arbitrage is the purpose of buying bitcoin on the loss but they can sell it to more better price which can cover the actual loss and transaction fee.This trick can be used on many countries where centralized exchanges doesn't have direct buying option for bitcoin with fiat.

Yes! I think even at buying loss they will surely be getting that loss when they sell to a higher price, I have done something like this in my trading and I have never realise that I loss track on the price I have bought and thinking about this I just need to buy at a higher price to reclaim that loss in selling, actually because of Volatileness we sometimes don't keep track anymore and just go with the flow in trading.

Now the average youth in Nigeria is entirely into cryprocurrency with the higher number of buyers and sellers, basically the dollar equivalent to 1USD=N450, this price fluctuates at all times.
In fact, in Nigeria, every buyers that don't want to trade on centralised exchange have their own negotiable price for buying and selling bitcoin, the only p2p exchange that have a fixed price are the Remitano, Patricia, Luno, and Binance, so instead of the sellers passing through some stress, they quickly sends out to individual buyer and bid in price negotiations, because of this incidence, people think Nigerians are buying bitcoin at loss. So basically, if buyer can negotiate properly with seller,  s(he) can sell with gain on the centralised exchange listed above.

The arbitrary aspect was well understood from your statement but it seems the buying at loss aspect is still been misunderstood as I read through the replies above. The price highlighted by the OP isn't a loss price, that's what the particular individuals is willing the sell his bitcoin on that peer2peer exchange and it's even a steal. The Naira rate per dollar for the cryptocurrencies market is totally different from that of the general market. That's just how it works in the country. Nobody can tell you this is the official buying or selling price of bitcoin when converting to Naira.

That's why we make our trades in dollars then negotiate what the price in Naira would be. There's no two exchange selling at exact same price, it varies. Not even the banks or payment options like Master and Visa buys and sells the naira at the official price displayed when you Google. So basically, the buyers isn't buying at loss because if he decides to sell, he most definitely would be making profit immediately.

 
 It was vague for me at first and wonder how those Nigerians are profiting if they buy bitcoin at loss. But after reading cryptopreneurboss explanations about how those transactions and trading works. Basically, makes sense why Nigerians are doing this.
 The firs thing that I thought of was, if they aren't gaining profits why are they still buying at loss?
 This peer2peer exchange offers actually gives them an instant profit, I understand it now. Hassle free +f fast profits.

Bitcoin is a movement currency which no one can predict the actual amount price in the market, which is every profit make base on the level of understanding the market analysis made before start trading, Therefore no country is perfect on the market, because is centralized exchange platform.

all of us buy bitcoins at a loss because of the fees of the exchange or on the wallet where we buy .

 thats a  first loss but theres also a second loss that we can experience and that is when the price of bitcoin goes down .reading earlier replies , i see that nigerian currency are complicated , this makes them look like they are buying at a loss but as what some user said , they can still sell at a high price on exchanges . why worry too much to them ? we should worry much on our own local currency

Not only Nigerians,all the people around the world was buying bitcoin with a belief on it.The price may increase after some days,even in a week or in a year.It doesn't matter on time,you should need of patience at every moment in the trading. Don't panic,if the price reduced further.You should hold till the next rise.