How MoneyPak and Vanilla closing will effect peer to peer bitcoin trading


Earlier this week we announced that in early 2015 MoneyPak and Vanilla will be no more. This has caused a lot of discussion in the P2P bitcoin trading community (Localbitcoins and Bitwallet) about what will replace them. Lets look at our prediction for what will happen.
Netspend – Relies on the Vanilla PIN network and the likelihood is that Netspend will stop offering pins also.

Reloadit – This is not widely available and rumor is that it will also close or change to follow Vanilla and remove pins.

Other payment methods – Payment methods such as bank deposit and Paypal are easily reversible, require more effort from both the buyer and seller. The worst part is they are plagued by scams.


Here is our prediction for what will happen
The remaining methods of payment will suffer from a glut of sellers who no longer can sell using reload cards. The competition will cause a steep decline in sale prices. This was seen with the MoneyPak issues and those sellers moving to Vanilla cards. 6 months ago Vanilla prices were typically 25-30% above Bitstamp and are now often 10-15% above Bitstamp.

The inexperience of those sellers using new and reversible payment methods will combine with how easy it is to commit fraud through other payment methods (MIM attacks, receipt fraud, ect). The overload of sellers and falling prices will cause many to become desperate and relax their standards to earn business. This will attract scammers who take advantage of that environment. The amount of scams on websites like Localbitcoins will explode. Instead of seeing mentions of the 3-5 a day currently seen in the forums we believe there will be reports of 20  or more scams a day.

The results.

Spring 2015 – Those who read this and ignore it, thinking they know better or can simply move to currently know payment methods will lose money and over extend themselves.This is already happening with many traders who borrow on P2P websites like BitLendingClub. The simply cannot afford only earning a 5-10% commission on coins they borrowed at 10% or higher interest, pay the website fees while dealing with price fluctuations and other losses.

Late spring to summer 2015 – These sellers will not be able to make a profit, borrowers will not be able to repay their loans and many will go out of business.

Summer to fall 2015 – Sellers who prepared for this (it has been known in many circles for months) have developed other ways of selling their coins that don’t rely on exchanges or reversible payment methods. They will lose volume from the loss of exchange business but they will not lose money. Competition will be reduced as lower quality sellers go out of business.

Winter 2015 to spring 2016 -If the higher quality sellers can survive 12-18 months they will be in a good position to capitalize on their situation. Our hope is that in late 2015 to early 2016 the bitcoin trading community will rebalance itself.

Disagree with us? Leave a comment below.

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