Lesson

Where the Spread Comes From: A Case Study of the Indian Rupee P2P Market

Why does USDT on Indian P2P cost 9–11% more than a dollar at the bank, and where does the gap between buy and sell prices come from? We take the rupee market as a case study: the same factors work in any country, only their weight changes.

AuthorAntonio MerklePublishedOctober 30, 202611 min read

The premium over the bank rate

According to the P2P.Army converter, that night Indian Bank bought dollars at ₹94.67 and sold at ₹95.80, while the average USDT buy price on P2P exchanges was about ₹106. The 9–11% gap is what the market pays for quick access to digital dollars outside the bank, including taxes and risks. In other countries the premium can be smaller or larger — and even negative if the local currency is hard to buy with dollars.

What the spread is made of

Taxes

In India, crypto profit is taxed at 30% with no expense deductions, and 1% TDS is withheld from the transfer amount. Sellers have to price this in: 1% TDS on a 1,000 USDT sale is about ₹1,050 — more than the round’s entire gross profit at a 1% spread (lesson 6). Where the tax is lower or there is no withholding on turnover, the spread can be narrower.

Account freeze risk

If a buyer paid with a fraud victim’s money, after a complaint the bank may freeze the seller’s account — sometimes weeks after the trade. Honest merchants price this risk in, cautious participants leave the market, and competition falls. More in lesson 7.

Limits and minimum amounts

UPI person-to-person transfers are limited to ₹1 lakh per day, so large trades go by bank transfer — and there are fewer counterparties for them. The flip side is minimum limits at merchants with the best prices. In the book below, USDT buyers on Bybit paid ₹109–109.41, but their minimum trade was ₹5 lakh to ₹20.8 lakh. With 1,000 USDT of capital you cannot take that price.

Payment method

Buyers and sellers assess each method’s risk differently, so spreads differ: +1.94% for Google Pay, +1.03% for Paytm. The negative UPI spread comes from an anomalous top ad, covered below.

Exchange liquidity

The best seller price on KuCoin is ₹109.45, 4% above Binance. But KuCoin’s rupee Activity 24H that night was 3,048 versus 133,867 on Binance: on a thin market a high price lasts longer, and trades are slower.

Anomalous ads

The top rows of a book are often taken by new accounts: on Binance the best UPI seller offered ₹103 with a single trade in their history, and on Bybit and HTX there were ads at ₹90.99 and ₹115 from accounts with five and seven trades. A “100+ orders and 95%+ completion rate” filter removes this noise.

What is left for the taker and the maker

After filtering the market is more honest: on Binance you can buy at ₹104.99 and sell at ₹103.93, so a taker loses about 1% per round. A maker who posts ads one tick better than the best trusted ones — buying at ₹103.94 and selling at ₹104.98 — gets about +1.00% before fees and taxes. That 1% is the payment for the risks in the table above: tax, a possible freeze, time and capital.

About the author

Antonio Merkle

Crypto expert, arbitrage trader and investor

Crypto expert and hands-on crypto arbitrage trader, investor and software developer with over 20 years of experience. On the P2P.Army blog he covers exchange news, P2P and cross-exchange arbitrage.

• Crypto arbitrage
• P2P arbitrage
• Cross-exchange arbitrage
• Crypto exchanges
• Investing
• Software development

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