Everything You Should Know About Bitcoin ATMs

Everything You Should Know About Bitcoin ATMs

The rise of the automated teller machine ushered in a new era of personal finance, and ATMs are even applicable with bitcoin now.

No, not your standard BofA ATMs or Wells Fargo, but actual ATMs that come through bitcoin themselves.

A bitcoin ATM gives you the opportunity to cut out some of the fees by buying direct, but there are some hidden agendas we need to discuss before you Google one, rush out the door, and spend your paycheck on bitcoin through a machine. Let’s go over everything you need to know.

What Exactly is a Bitcoin ATM?

What Exactly Is A Bitcoin ATM?

Bitcoin ATMs are basically what you’d expect: an automated teller machine that deals in bitcoin instead of USD. The thing is though, bitcoin is all digital blockchain, right?

That’s where it gets tricky.

Bitcoin ATMs connect to the internet, and through the bitcoin exchange network, you can exchange USD for bitcoin. These ATMs are directly linked to bitcoin, so you aren’t running a ton of miner’s fees or anything along those lines.

With a bitcoin ATM, you directly exchange money for bitcoin. You can send it directly to a bitcoin-approved wallet by inputting your receival codes (depending on what wallet provider you use), where the BTC can immediately be transferred.

But if it were just a machine to put your money in, then it wouldn’t really be a true automated teller machine, now would it? What makes a bitcoin ATM useful is the ability to go anywhere that one exists, and sell your bitcoin in person, and immediately withdraw cash from the ATM.

For the savvy investor who’s spending half of their day watching fluctuating crypto prices and stocks, this might not be a revelation, but a lot of bitcoin investors are just average Joe’s like you and I.

People who may not have more than a few full BTC, but are rocking 0.0055 BTC and dabbling with it in online casinos and investments, such as through Cash App trading.

Bitcoin ATMs are versatile, and offer more utility for your bitcoin in real-time application. No more waiting for BTC to clean when selling it on the marketplace, even those five to ten minute withdrawal times are a thing of the past.

That’s the ideal, two-way cash-dispensing model, but there are some caveats. You can find right on the bitcoin ATM page (a news site for bitcoin) that they have multiple options available.

Businesses want to put a bitcoin ATM in their establishment because it generates foot traffic and revenue, but it’s also going to cost them some based on which model they want.

In their description, you can see that some models are one-way only, meaning you can only either deposit cash or withdraw cash by selling bitcoin. Also, cash dispensers are optional, so you really have to know the details of your nearby bitcoin ATM before you put all your stock in visiting it in a pinch.

How to Use a Bitcoin ATM

To start, you have to decide whether you’re going to enter with a wallet (app) that allows you to scan a QR code while adding or subtracting funds from it, or be prepared to make a paper wallet, which will be provided to you at most bitcoin ATMs.

Upon activating a bitcoin ATM, you will be asked if you have a wallet, or if you wish to create one. From that point on, it will take you to the next screen where you can either withdraw bitcoin, purchase bitcoin, or create that new paper wallet.

Keep in mind that the QR code on said paper wallet can be used to access your bitcoin, so it’s recommended to either keep it on lockdown, or write down the wallet information provided on your slip for later use.

If you are purchasing bitcoin, you can use a debit card, or you can use cash if that’s what you have on-hand. Make sure you have your payment ready, and your new wallet or app wallet prepared as well.

Even though it feels like a drawn-out way of going about it, the BATM will now ask where you want your bitcoin sent once you decide to make a purchase. Some ATMs will allow you to manually input codes for your wallets, so the entire thing can be done electronically without requiring your paper slip or phone.

Some bitcoin ATMs will require that you receive a verification code sent to your phone if you have an existing wallet. If you’re concerned about identity theft and leaving a paper trail of your personal information, don’t worry: you can use a prepaid “burner” cell phone for this without any issue.

If you plan on visiting bitcoin ATMs frequently, you can get a full year of service on a brand new burner phone for about $160.00.

The last thing that you will do is input your payment. That could be through a debit card or cash. Once the payment is processed, bitcoin will be sent to your wallet.

It’s possible that some ATMs will take five to ten minutes to send that bitcoin to your wallet, so a touch bit of patience is in order. Your bitcoin is now on its way to your account.

Can I Combine Multiple Paper Wallets With a Digital Wallet Like Cash App?

Can I Combine Multiple Paper Wallets With A Digital Wallet Like Cash App?

You absolutely can. There are a lot of reputable digital crypto wallets available right now, but among them, Cash App is one of the most popular.

You can choose to deposit bitcoin into your BTC balance, and simply scan the QR code on your paper wallet, or input the information from the paper slip into your digital wallet of choice.

Transfers may incur fees depending on what platform you are using, so keep that in mind. It can take about ten minutes for this transfer to occur, but it’s not uncommon for it to take up to an hour depending on the volume of people utilizing these services.

In the future, we expect to see instant transactions and transfers with all cryptocurrencies, just as we’ve seen with services like Robinhood for the stock market.

Bitcoin ATM Fees

You’re not going to get away from this without paying some fees. Otherwise, these ATMs wouldn’t make any money, and wouldn’t exist as a result.

There are a lot of different ATM providers that have direct access to the bitcoin network, and for the convenience of buying bitcoin through them, you have to pay the price.

That price can range from 5% up to 8% on average, and they do reach a maximum threshold. If you were to use a LocalCoin ATM, and you utilized the maximum daily amount of USD (which is $9,000), you would pay between $630.00 and $720.00 in fees.

Sounds crazy, right?

When you pin it against online marketplaces, it’s hard to validate buying bitcoin at an ATM. Coinbase is one of the most popular online marketplaces for buying any cryptocurrency, especially bitcoin.

On average, users can expect a maximum fee of 3.99% on their purchases. This is the top of the list, because many times, you can incur smaller fees.

That means if you were to spend the same amount of money on Coinbase as you were at a LocalCoin ATM, you would only pay $359.10 for a $9,000 transaction, saving you between $270.90 and $360.90.

So Why do People Use Bitcoin ATMs?

So Why Do People Use Bitcoin ATMs?

Convenience. You and I are savvy investors that are constantly growing our knowledge on bitcoin, crypto, and the future of a decentralized global currency. To us, it’s a movement. To those just reading the headlines as they come out, it’s a get-rich-quick scheme.

Bitcoin is just like any other platform of investing: you need to know what you’re buying, when to buy it, what can happen to it, where it comes from, etcetera. Bitcoin ATMs are designed to make the process extremely simple for people who don’t know a lot about bitcoin, but want to get into it anyway.

If you think about the tools at your disposal online in a marketplace like Coinbase, then you have just about everything you need to track bitcoin prices, trade instantly, and sell bitcoin to make a profit.

Yes, they have fees, but they’re nowhere near as high as bitcoin ATMs. These sites and marketplaces still have to make a profit, because they are businesses, but they take a different approach.

There’s still a technological gap between generations. The internet, and subsequently, purchasing things on the internet, is still a fairly young concept.

Amazon isn’t even a 30-year-old company yet, so there are plenty of people in older generations that weren’t raised with the same online access to things that many of us use every single day.

Bitcoin ATMs are designed for ease of access, and can come in handy in many situations regardless of your understanding of cryptocurrency.

But the main group of people who will use them and benefit off of them are those that saw the headlines and the hyperbole about bitcoin price rises in the past, and want to get in on some of the action, but also don’t want to have to do the hard work of learning about your investments.

Are Bitcoin ATMs Predatory Marketing Practices?

Are Bitcoin ATMs Predatory Marketing Practices?

That comes down to personal opinion. Do they charge a lot more than places like Coinbase?

Yes, they do. But you also have to think that they had to build the machinery, design the software, develop a marketing team to sell these to businesses, and actually maintain a connection with the network where they operate through.

Then you have online marketplaces that have a much smaller overhead, and therefore they can discount their services to entice investors to trade with them instead of using physical bitcoin ATMs.

There is some business sense here, but you can’t deny the fact that BATMs charge much higher fees, and at a certain point, it’s not about a healthy profit anymore.

You can run into fees as high as 13% at a bitcoin ATM (and I’m sure that there are a few more out there with higher fees). If their daily limit is $10,000, you’re giving them $1,300 out of your own hard-earned money just for the privilege of buying bitcoin.

That same fee would be $399.00 on Coinbase, or other online marketplaces.

Are Bitcoin ATMs Legal?

Yes, they are legal, but just like operating a regular ATM in your establishment, business owners and corporations have federal guidelines to adhere to. ATM Marketplace states that operating a BATM without a license, it’s a punishable offense that may land you in federal prison. That’s nothing to joke about.

Now, you as the BATM visitor don’t have anything to worry about. You don’t have to verify licensing by the business owners. You cannot be faulted for using a bitcoin ATM that’s listed online, and actually lets you transfer your bitcoin into cash.

It’s up to the establishment owners to ensure the licenses stay up to date.

This is the same issue as some standard ATMs as well. You have to have proper licensing, otherwise it’s a punishable offense. The presence of bitcoin ATMs are legal, and there is nothing wrong with selling your bitcoin at a BATM to exchange for USD.

As recently as November of 2019, the IRS has begun looking into taxation and regulation on bitcoin ATMs. While it’s considered completely legal, and a BATM visitor will not incur any penalties, nor fines or jail time in any way, there’s still some obvious trepidation floating around the subject.

For now, use BATMs at your leisure. There are over 6,000 of them worldwide, many of them in the United States, and there’s no legality issues surrounding them.

That being said, you should stay up to date on what the IRS is doing in response to the growing number of BATMs, and if you might run into different taxation laws in the future. Stay updated as often as possible.

Can You Make Money Hosting a Bitcoin ATM?

Currently, there are around 6,000 bitcoin ATMs around the world, with many of those being located in the United States. That’s not a lot of businesses that qualify.

You can earn income from hosting a bitcoin ATM in your location if it meets certain specific requirements by these ATM manufacturers. They want to be certain that there will be enough foot traffic in your place of business that it will benefit them to place one of their BATMs there.

Some business owners have been known to pay money to host a BATM to bring people in, though if you’re lucky, you can actually earn passive income just from hosting it. Of course, there’s the electricity to run it that you have to consider as well.

Are There Other Crypto ATMs Out There?

Yes, there most certainly are. Most of you will be aware of Ethereum, the top cryptocurrency next to bitcoin. Many ATM providers aren’t just solely pleading themselves to bitcoin: there are a lot of cryptos out there that have value in being traded, and ATM providers want to cash in on that.

Just alone in the United States, there are well over 3,000 ATMs that allow you to trade bitcoin, as well as Ethereum and Litecoin. But just like I mentioned before, there’s a catch to it all.

Some of these ATMs only allow you to buy them there. The benefit is that the fees are still lower than many online marketplaces, or at least they can be, which is how these ATM providers stay in business.

Because these third-party ATMs are not going directly through bitcoin or Ethereum, for example, they are still incurring fees. They need to charge you to make up the difference, and turn a profit, as any business would.

Those vary from ATM provider to ATM provider, and some local laws may change as time goes on regarding taxation. It’s good to update your knowledge on bitcoin and crypto ATMs every couple of months or so.

BATMs for the Savvy Trader

Bitcoin ATMs have their time and place, but you can also utilize online marketplaces for convenience. You might run into low fees with a bitcoin ATM, but with their scarcity, you’re not likely to run into one in your town or city anytime soon.

In about five years, you might see more of them. It is almost always cheaper to purchase bitcoin on an online marketplace.

Bitcoin ATMs are more for establishments than they are for the individual investor. Because BATMs are directly distributed and sold through Bitcoin, there’s no middle-man, so the lack of fees brings people like you and I into these establishments.

It’s a win-win for us and business owners at the end of the day, but has questionable, predatory marketing practices that you need to be aware of.

Last Updated on August 12, 2020 by Eito

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