A Bitcoin ATM is a convenient way to purchase Bitcoin, but is it worthwhile?
Bitcoin and other cryptocurrencies have seen rapid growth in demand over the last several years. It’s not easy to meet this demand, but recent developments have made it easier for almost everyone to exchange it.
You can do exactly that with cryptocurrency ATMs, as their name implies.
About 19,000 cryptocurrency ATMs can be found all over the globe. You can use one to buy and sell digital currencies at a physical kiosk, making owning and purchasing these properties much easier.
What Is a Bitcoin ATM and How Does It Work?
Despite their similarities in name, Bitcoin ATMs are nothing like the standard, bank-operated ATMs that have been around for decades.
To begin with, funds deposited or withdrawn from cryptocurrency ATMs do not pass through a bank account. Instead, they simply allow you to swap digital currencies like Bitcoin for cash or the other way around.
The process is straightforward: approach a crypto ATM and read the on-screen instructions. If you want to purchase cryptocurrency, the computer will prompt you to enter the number.
Then, in your cryptocurrency wallet, make a new receiving address and QR code. The computer will prompt you to deposit cash to complete the transaction after it has been scanned.
Selling Bitcoin to a cryptocurrency ATM works in a similar way. Instead of sending money to the ATM, you’ll be asked to send money to the ATM.
If the transaction has been successfully processed by the ATM, an equal amount of cash will be immediately dispensed.
Why You Should Consider Using a Crypto ATM
Bitcoin ATMs rose to prominence as a convenient way to obtain cryptocurrencies quickly and conveniently. When big, reputable cryptocurrency exchanges like Coinbase, Gemini, and Kraken did not exist several years ago, they were a very common choice.
They still have a position today since they are the only way to directly exchange physical cash for cryptocurrencies.
Many exchanges depend on sluggish bank transfers and verification procedures, but Bitcoin ATMs do not. As a result, they’re often used by people who want to keep a clean digital trail and protect their identities.
However, it’s worth noting that many countries have laws requiring Bitcoin ATMs to recognise their customers. In that scenario, you’ll be asked to confirm your phone number before proceeding with the transaction.
Owing to the lack of full-fledged authentication procedures, most ATMs have significantly lower transaction limits. Governments will be unable to monitor your tax liability until you complete a KYC process with the ATM operator.
Bitcoin ATMs can only allow you to buy or sell small amounts of cryptocurrency to prevent this loophole from being abused.
How Do You Locate a Bitcoin ATM in Your Area?
Coin ATM Radar is a free web and smartphone app that keeps track of cryptocurrency ATM availability around the world.
Due to the decentralized nature of cryptocurrencies, almost any business can decide to install an ATM on their premises. Many business owners do this in order to boost foot traffic or enhance their brand value.
This is why Bitcoin ATMs are more likely to be found in shopping centers, convenience stores, and coffee shops—places you’d want to visit regularly.
Since the devices are configured directly by the ATM operator, security is normally not an issue. In other words, as long as they’re all made by the same company, all ATMs will behave identically.
When to Avoid Using a Cryptocurrency ATM
The convenience of a cryptocurrency ATM takes precedence over all other considerations. Unfortunately, this comes at a significant cost.
Bitcoin ATMs, in particular, will normally charge you a transaction fee of 7-20% of your total transaction amount. Lower fees are almost unheard of in the cryptocurrency ATM world, and there is no real upper cap.
Although some of this charge goes to the ATM’s owner and operator, the majority of it is most likely used to cover Bitcoin’s network fees.
Unlike online cryptocurrency exchanges, which provide you with a wallet, these ATMs require you to make an on-chain transaction every time you use them. When the network is congested, however, fees will spike as everyone competes for the quickest transaction settlement times.
Fees and Other Charges
Exchanges are not deterred by the same volatility in network fees since they keep ownership of all customer funds—even if the cryptocurrency was exchanged between two users on the platform. Only when you ‘withdraw’ your balance from the exchange to a wallet of your choosing do network transfer fees apply.
In addition, even though ATMs do not charge an exorbitant transaction fee, a small percentage of them give a lower buy/sell price than the current exchange rate. For example, instead of paying $50,000 for Bitcoin on an exchange, an ATM can sell it to you for $55,000. In real-world terms, a $100 trade would net you 0.001818 BTC rather than 0.002 BTC.
This 10% gap isn’t universal; many ATMs track global rates far more closely. Even then, their prices can only be updated every few minutes.
You will not be able to profit from sudden drops in the exchange rate due to the volatility of the cryptocurrency sector. This is the same idea as paying a higher rate at an airport’s foreign currency counter.
Bitcoin ATMs Are Safe, but They Are Expensive
Until locking in your purchase at the ATM, visit a cryptocurrency exchange rate monitoring website like CoinMarketCap to ensure you’re getting a reasonable exchange rate.
Avoid Bitcoin ATMs that charge a transaction fee and charge a huge premium on the exchange rate. You may be better off using a cryptocurrency exchange for larger and more regular transactions.
This is due to the fact that they often charge lower rates and have easy year-end reports that allow you to assess your tax liability.