Bitcoin ATMs, a relic of the crypto boom, hang in the corner store

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Bitcoin ATMs are an expensive way to gain crypto exposure due to their high fees. Michael M. Santiago/Getty Images

Cracks are beginning to form in one of the most visible manifestations of the recent crypto craze: Bitcoin ATM. But as installs of new machines begin to stagnate amid the crypto downturn, there’s reason to think kiosks aren’t going away anytime soon.

Even as crypto traders retreat, tens of thousands of Bitcoin ATMs continue to buzz, tucked away in the corners of convenience stores and bars around the world. The machines allow users to exchange money for Bitcoin and sometimes other tokens, often charging fees of over 10% and sometimes as high as 20%.

This makes them one of the most expensive ways to gain exposure to crypto, and most investors have shunned them in favor of trading platforms like Coinbase Global (ticker: COIN).

However, some Bitcoin ATM operators claim that the recent crypto downturn is not significantly slowing their business. One company, Atlanta, Georgia-based Bitcoin Depot, said it plans to go public at a valuation of around $885 million by the end of March through a merger with GSR II. Meteora Acquisition Corp. (GSRM), a special purpose acquisition company (SPAC).

Historically, our trading volumes have not correlated to the price and volatility of Bitcoin and many other cryptocurrencies, Bitcoin Depot CEO Brandon Mintz said in a presentation related to the SPAC merger last week. . He later added, It is very possible that Bitcoin ATMs will be as widespread as cash ATMs within the next decade.

For now, it looks like the growth of crypto-ATMs is slowing down. As of Monday, there were 38,409 crypto ATMs installed worldwide, according to Coin ATM Radar. That’s less than the 38,810 that were installed at the top in August. The stagnation is the first time that ATM installations have plateaued since the machines first appeared more than a decade ago.

Bitcoin ATMs are not aimed at typical investors who buy and hold cryptocurrencies or those looking to trade tokens.

Executives at Bitcoin Depot, for example, claim that only 29% of their users buy the tokens as an investment or store of value. Instead, the vast majority say they use Bitcoin to send money to someone else or for online purchases. This makes the machines more competitive with remittance companies like Western Union (WU) or MoneyGram International (MGI) than a trading platform like Coinbase or Binance.

About four in five ATM users have an income of less than $80,000, and the median transaction size at a kiosk is just $180.

For now, the crypto ATM market is relatively fragmented and dominated by small operators. Bitcoin Depot, which is the largest, has a market share of 17.6%, according to Coin ATM Radar. Its competitors include CoinCloud and CoinFlip, and in total, the top 10 operators only manage around two-thirds of the market.

A lot of smaller players just shut down and decided it was too expensive to operate, says Eric Grill, CEO of ChainBytes, which makes crypto ATMs.

A small operator, for example, might have to pay for armored car service and compliance staff to meet federal and state rules around money transfers, Grill says. The machines have become a favorite for scammers asking customers to send money in scams, Grill says.

Last year, the Federal Trade Commission warned of a scam in which bogus Border Patrol agents threatened victims that their financial accounts would be frozen if they did not send crypto through one of the ATMs. automatic. The US Government Accountability Office, in a December 2021 report, said crypto kiosks are sometimes used to facilitate human trafficking.

The kiosks have also been criticized for their high fees. Of the operators reporting the data, most machines have fees that range between 8% and 16% to buy tokens, according to Coin ATM Radar, and between 5% and 15% to sell.

The fees are exorbitant by any measure. They’re just another bogus predatory way to prey on the poor, says John Reed Stark, a former SEC attorney who was a frequent crypto-skeptic.

Bitcoin Depots Mintz in a statement through a spokeswoman said his company’s customers are willing to pay higher fees than they would on an exchange for the ability to use Bitcoin. money to buy crypto and get easier-to-reach customer service, among other reasons.

All of this points to the reality that Bitcoin ATM customers are willing to pay more than many online options to have the convenience, ease of use, and speed that Bitcoin ATMs, including ours, provide, a Mintz said.

Other crypto companies have struggled to get the necessary Securities and Exchange Commission approvals to go public. Crypto company Circle Internet Financial Ltd. reversed its own SPAC merger late last year after the SEC failed to approve a required registration statement within a deadline.

Our conversations are going well with the SEC. We remain on track to close later this quarter and currently do not expect any delays to that schedule, Mintz said.

An SEC spokeswoman declined to comment.

Email Joe Light at [email protected]

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